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Mortgage
rates in the U.S. are incredibly low... and there's a great chance
they'll go lower...
Last
week, U.S. 30-year mortgage rates finished the week around 3.6%.
They
haven't been this low – basically ever. (The exception is late
2012, when they nearly touched 3.3%.)
As
an American, it sounds outrageous to even consider that they could go
lower. But when you take the rest of the world into account, it's not
as outrageous as it seems.
I
will show you why today. But first, let's back up for a minute...
Where
do mortgage rates come from? Who decides what they will be?
Typically,
the U.S. 30-year mortgage rate is (somewhat) based off of the U.S.
30-year Treasury bond interest rate...
Take
the 30-year government rate (which is thought of as the "risk-free"
rate)... add a bit of interest due to the risk of the borrower... and
boom, there you have it. (It's a rough approximation of reality, at
least.)
You
can see this idea in the chart below... The lower line is the 30-year
Treasury rate. The upper line is the 30-year mortgage rate...
It
has to do with what's going on in the rest of the world...
Interest
rates are crashing globally. And 30-year government bond rates
outside the U.S. are "crazy low." Take a look:
Look
closely at this list... One of these four is not like the others.
Which one is it?
It
doesn't take long to realize that U.S. interest rates are
dramatically higher than the rest of the developed world.
Keep
this in mind: Money flows where it's treated best.
The
difference between U.S. rates and the rest of the world is simply too
great for investors to ignore... Money is about to flow into the U.S.
Investors
who have their money in low-paying bonds in Germany, Japan, and
Switzerland will move some of that money into higher-paying U.S.
bonds.
That
will put downward pressure on long-term U.S. interest rates.
And
the chart above shows, if U.S. interest rates on 30-year government
bonds go down, U.S. mortgage rates will likely follow them lower.
Mortgage
rates are incredibly low in the U.S. based on history. And as I
showed today, there's a strong chance they could go even lower.
Give
me a call if I can help you in any way.
On
Your Team,
Ken
951-760-3833
KenAHall@gmail.com
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