Mortgage bond prices finished the week sharply higher which pushed rates lower. Continued stock weakness early in the week helped rates improve. Consumer sentiment printed at 98.1 versus the expected 96.8. Cheap gas prices and rising home equity were good for consumers in January. New home sales printed at 544K versus the expected 506K. Durable goods orders fell 5.1% versus the expected 0.5% decline. The Fed kept rates unchanged and market sentiment swung from an expected three or four additional rate hikes this year to maybe only one or two. Oil prices remained low overall but rose for the week. News that Russia and OPEC could cut a deal to reduce production by 5% in order to combat falling prices pressured oil prices higher. Mortgage interest rates finished the week better by approximately .125%. Negative Rate Cut The Bank of Japan made a surprise rate cut Friday in an attempt to stimulate their economy. This rate cut was especially unique in that it implemented negative interest rates in the third largest economy in the world. The BOJ set their benchmark rate to negative 0.1%. This means commercial banks will have to pay the Bank of Japan 0.1% for some deposits. This did not immediately impact consumer savings accounts but Japanese banks can decide to pass along the costs to consumers and start charging them in the near future. Governor Kuroda said, "further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people's deflationary mindset." The BOJ went on to note that they will, "cut interest rates further into negative territory if judged as necessary." A flight to quality buying of U.S. investments followed the announcement. This was positive for lower rates in the U.S. in the short term. Now is a great time to take advantage of historically favorable mortgage interest rates.
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