March 29, 2019
Right after the election in November 2016 mortgage rates jumped quickly from 3.5% to 4.2% as market participants believed that President Trump’s proposed individual and corporate income tax cuts. repatriation of corporate earnings currently locked overseas, and significant relief from the currently onerous regulatory burden, would boost GDP growth significantly, boost inflation, and push long-term interest rates higher. Additional Fed tightening last year boosted the 30-year mortgage rate to 4.9%. But the Fed recently signaled that it intends to leave rates unchanged for the foreseeable future, the stock market decline in the fourth quarter created an expectation for slower growth ahead, and slower growth overseas, allowed long-term interest rates to decline quickly. The 30-year mortgage rate dropped from 0.9% from 4.9% late last year to 4.0% currently.
If growth rebounds in the final three quarters of this year and inflation remains steady, it is likely that long-term interest rates will rise slightly as the year progresses. We expect the 30-year mortgage rate to end the year at about 4.4%.