Doves and Dives: Mortgage Rates Set to Fall Following Fed Statement

Mortgage rates were flat over the last seven days, but they are primed to fall on the heels of the March meeting of the Federal Open Market Committee, which concluded earlier today.

After a quiet start to a week that was light on market-moving economic data and geopolitical developments, bond yields – a proxy and leading indicator for mortgage rates – moved sharply downward following the Fed signals that additional hikes to its benchmark rate were unlikely to occur this year. More importantly for bond markets, the Fed said it will stop the reduction of its balance sheet in the fall and slow the rate of reduction until then. The latter will inject more demand into the bond market, which will push yields, and mortgage rates, downward as a result.

Markets had largely assumed that an immediate rate hike was unlikely, but the revelation that most of the committee sees no hikes as necessary for the remainder of 2019 was viewed by many analysts as dovish and indicative of the Fed’s growing sensitivity to a slowing global economy.

Together, these developments will certainly result in a decline in mortgage rates, meaning that, after remaining in a narrow range and hovering around 14-month lows for most of the last couple months, mortgage rates will be moving even lower.