Predicting interest rates for 2020, the majority forecaster expected to see interest rates rising, observed from the point of 2019 situation. However, with uncertainty in economic growth in 2020, analysts are concluding that the rise may not arrive before 2021. In the meantime, mortgage refinancing is surging as mortgage rates are dropping to historical lows What will happen to interest rates further from this point and what is the general forecast for interest rates in the US?
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Economic Growth Slowing Down in 2020
Since March when the COVID-19 outbreak affected the US in the majority, economic growth has been on a decline. With no economic growth to push inflation down, the latest data regarding economic growth have shattered all hopes analysts had for the year. The outlook is not particularly negative as the economy is still holding on, but neither can be classified as positive. That means that interest rates might not sink further from this point, but stay around the current level.
Interest Rates Likely to Stay Below 1%
Treasury yield for the past decade has slightly risen in the last period off its record low value set at 0.5%. The chances are that interest rates are staying below the value of 1% by the end of 2020 and possibly into 2021. By far, the stock market has been spiking on expectations of improvement, however, Treasury bonds are likely to wait for a serious recovery. The Federal Reserves won’t raise the mortgage rates until the economic growth doesn’t show some actual progress and improvement.
The Lowest Interest Rates on the Record
Refinancing volumes for mortgages are peaking to a record high in 2020 as mortgage rates are dropping. To simulate the demand in bonds and boost the credit markets, the Federal Reserve is buying mortgage-backed securities. Fannie Mae from the Mortgage Bankers Association claims that the interest rates are probably heading to lower values further into 2020 and 2021.
