Mortgage rates were flat for most of the past week – holding steady at their highest levels since September 2013, according to Zillow Mortgages data. They edged lower late Wednesday after meeting minutes from the Federal Open Market Committee (FOMC) were released.
Elections tumult in Italy and renewed escalation in regional tensions in Spain sent mortgage rates to their lowest levels since mid-April early this week. Trade tensions between the United States and China compounded the financial market flight to safe assets, pushing mortgage rates downward.
It’s not the first time rates have been dampened by international turmoil: Close to two years ago — in June 2016 — the Brexit vote indirectly benefited U.S. home borrowers by prompting uncertainty about the future direction of the European Union and the United Kingdom, raising the profile of European populism. So has financial instability in China and, more than once this spring, fears of a global trade war.
The drop in rates can’t be attributed to geopolitics alone. Comments by Atlanta Federal Reserve President Raphael Bostic, a voting member of the Federal Open Market Committee (FOMC), suggested that the Fed may be approaching the end of its rate-hiking cycle within three to five additional rate hikes.
Further cooling was indicated by the Commerce Department’s revised release of key first-quarter data: Consumer spending was lowered to 1 percent, from 1.1 percent — the weakest growth in nearly five years. Gross domestic product was lowered by 10 basis points to 2.2 percent.
Financial markets will keep an eye on incoming U.S. inflation data due Thursday and jobs data due Friday, as well as several speeches by key FOMC voters over the next week, but geopolitics are likely to continue driving major movements in financial markets.
