More than five years out of the “great recession”, mortgage rates in US are revisiting the record low levels made in 2012. Why? The Fed concluded its QE last October. It is expected to raise interest rate 2nd half of this year. Why interest rates stay low?

 

30yrMtg012115

3 weeks ago, the Swiss Franc ended its peg with the Euro, causing it to appreciate almost 30% over night.  At the same time, Swiss National Bank pushed its already negative interest rate down to -0.75%.  In other words, people have to pay the banks to hold their money!!

Interest rates in another European county Denmark has been negative since 2012!

Last month, European Central Bank (ECB) officially announced its much anticipated 60 billion euros monthly bond purchase, or the European version of the QE.  Some thinks it is not so much about how low interest rates would be pushed, rather, there will be short supply of bonds with positive yields (interest rates)!  The strongest EU member country Germany offers a mere 0.367% on its 10-Year Bond.

 

German10YrBondYield

Given this macro environment, it is expected that interest rates of all kinds, government bonds, mortgage, bank savings, etc., would not be moving much higher at all in the foreseeable future.