“This year, interest rates are going to rise“… I know we’ve all heard that over the past several years, but 2014 was to be the year rates finally went up. Well, interest rates have improved and were at their lowest point of the year (so far) on Wednesday. Why is this the case?
First, most analysts thought 2014 would be the end of low rates because the Federal Reserve was exiting the bond-buying business. Over the past several years, the Federal Reserve implemented a Quantitative Easing program known as QE. The third round (QE3) began tapering off at the end of 2013. The Federal Reserve currently plans to end the QE program later this month. This was going to make rates jump into the 5′s.
The end of QE3 was the expected reason rates would rise, but it is typically unforeseen events that impact interest rates. We’ve seen several unexpected events in 2014:
- Global Economy – There were signs of the global economy slowing at the start of the year in emerging markets such as China, Brazil and India. As the year continued, the economic numbers got worse. China could be at the start of its own housing crisis.
- Ukraine – The volatility created by the Russian involvement in Ukraine caused sanctions to be levied against Russia pushing its economy to the brink of a recession. These events have also caused a slowing of the economy overall in the Eurozone.
- Middle East – Instability in the Middle East can cause nervousness in the markets. The rise of ISIS certainly qualifies as instability. When the markets get nervous, money usually flows out of stocks and into bonds. This helps mortgage rates.
- Ebola - As the Ebola crisis intensifies, there are worries of it impacting the global economy.
When events like this happen, investors seek a safer investment than a troubled stock market. Stocks have lost major ground over the past few weeks. The US Dollar, which was panned mightily over the past few years, is now the safest haven in the market. More bonds are being purchased, and interest rates have improved.
Interest rates are now back into the high 3′s for a 30 year fixed rate loan. If you missed out on your refinance chance, it is back. If the property is in Georgia, I can refinance you into a new low rate. Contact me today to take advantage of this drop in rates before it is gone.