WASHINGTON–Despite the Fed’s move earlier this year to increase interest rates and its indication it plans to continue to do so in 2016, mortgage rates not only continue to decline, some analysts are suggesting the 30-year fixed-rate mortgage could ultimately hit new lows.
CNBC reported that mortgage rates are falling due to investors flooding the U.S. bond market. “Mortgage rates follow the yield on bonds that loosely follow the 10-year Treasury. Investors are buying bonds as a safety play in a highly volatile and largely negative stock market,” CNBC reported. “Signs of weakness in the U.S. economy, in addition to trouble in overseas markets, pushed the yield on the 10-year Treasury to its lowest level since 2012, and mortgage rates followed south.”
CNBC quoted one analyst observed that a healthy economy would be marked by mortgage rates in the 5% range and checking accounts would be paying around 2%.
Instead, CNBC further quoted an analyst as saying factors could push mortgage rates down as low as 2%. The thin margins could push many lenders to exit the business, the analysis added.