Long Rates Staying Below 1%
Kiplinger’s latest forecast on interest rates
While the stock market has been rising recently on expectations for better economic times as states start opening their economies, rates on Treasury bonds will likely await actual positive economic developments before rising much. The 10-year Treasury yield has risen only slightly off its record low of 0.5%. While it is not likely to move lower, it should stay below 1% for a while, given how uncertain the progress of the recovery will be once restrictions are lifted on the economy. Short-term rates will likely stay near zero for even longer. The Federal Reserve is not going to raise rates until the economy is close to normal again.
Average 30-year mortgage rates are likely headed down to around 3% eventually because of the low 10-year Treasury rate. However, they have not fallen as much as would be expected, because of heavy demand for refinancing. Lenders can get higher than normal margins on loans as long as there is heavy demand. Applications to refinance are still more than double last year’s level, although the 30-year rate dropped to 3.24% from 3.28% a week earlier as refinancing applications declined 6%.
Low mortgage rates should help support the virus-slowed housing market this spring by making mortgages easier to afford.
The bank prime lending rate is at a rock-bottom 3.25%. Auto and other consumer loans and home equity lines of credit tend to be based on this rate.
- 1Kiplinger’s Economic OutlooksRegularly updated insights on the economy’s next moves.
- 2GDP: -5.8% growth in 2020, down from 2.3% in 2019Kiplinger’s latest forecast for the GDP growth rate
- 3JOBS: States are reopening, but workers will come back slowlyKiplinger’s latest forecast on jobs
- 4INTEREST RATES: 10-year T-notes staying below 1.0% for a while - currently readingKiplinger’s latest forecast on interest rates
- 5INFLATION: 0.3% by the end of '20, from 2.3% at end '19Kiplinger’s latest forecast on inflation
- 6BUSINESS SPENDING: Down 10% to 20% in '20Kiplinger’s latest forecast on business equipment spending
- 7ENERGY: Crude oil trading from $35 to $40 per barrel in coming weeksKiplinger's latest forecast on the direction of energy prices
- 8HOUSING: Total starts down 2.0% in '20Kiplinger's latest forecast on housing starts and home sales
- 9RETAIL SALES: E-commerce surge will endureKiplinger’s latest forecast on retail sales and consumer spending.
- 10TRADE DEFICIT: Widening 3% in ’20Kiplinger's latest forecast on the direction of the trade deficit.