Easing global monetary policy continues to provide the tailwinds pushing mortgage rates lower and equity prices higher. Recent confirmation from the February PPI and CPI also confirmed that inflation remains in check. As stocks have gained back most of the losses from late last year, risk is back in vogue. 

Reduced mortgage rates have arrived just in time to boost what has been a slowing new market for the new and resale housing market. Recent stories on the glut of high-end homes (those over $10 million) have brought back the conversation as to whether and when housing will reset much lower. Our view is that a glut is unlikely given the strict underwriting guidelines that banks continue to follow. If anything, the return of low-interest rates may ignite a better than expected spring buying season in housing.

However, fears remain in the highly leveraged first world economies, especially in the corporate and government debt markets.  As previously mentioned, QE has created absurdly low rates around the world and true price discovery is difficult to attain.  Geopolitical events such as China trade talks, Brexit, and Italian debt levels are also worrisome, as well as the slowing of the global economy.  Low rates work as a tonic in addressing these issues and central banks realize that.

With the 10-year Treasury dipping below 2.600%, locking is not a bad idea.  However, given where European and Japanese bonds are trading, rates in the U.S. may go lower.  Be careful what your wish for, as lower rates may mean trouble ahead.  For now, all looks to be OK and borrower appear to be taking advantage of renewed low rates for both purchases and refinance. We continue to be cautious and are biased on locking-in interest rates at these levels.