Forecasting Mortgage Interest Rates in 2019: An Analysis of Economic Indicators and Central Bank Policies

The question of whether mortgage interest rates will go up or down in 2019 is a pressing concern for many homebuyers and policy makers alike. As we approach a critical period in the global economy, it is essential to dissect the various factors that influence the setting of interest rates, particularly those related to inflation, policy decisions, and economic performance.

The Role of Central Banks in Setting Interest Rates

Central banks, including the Federal Reserve, play a pivotal role in managing and controlling the economy through monetary policy instruments, one of which is the base rate. The base rate, also known as the Federal Funds Rate, is a critical tool that the Federal Reserve uses to influence broader interest rates in the economy, including mortgage rates. By adjusting the base rate, the Federal Reserve aims to manage inflation and promote stable economic growth.

Why the Fed Is Expected to Increase Interest Rates in 2019

Several key factors suggest that the Federal Reserve will likely raise interest rates in 2019. The Bankers and the Federal Reserve are not looking to allow the free market to naturally float, but to artificially control the Federal Funds Rate in an effort to stimulate the economy. This has led to concerns that the central bank is more focused on making a profit for themselves and their allies than on maintaining long-term economic stability.

Economic Outlook and Inflation Trends

Currently, inflationary pressures are rising, indicating that the economy is recovering strongly but may be approaching the point of overheating. Given the current rate of inflation, it is expected that the Federal Reserve will continue to implement incremental increases in the Bank of England base rate. These increases will subsequently impact interbank lending and mortgage rates. Additionally, mortgage lenders will remain competitive in the market, but will not price themselves out too high to maintain customer retention.

Historical Context: The 1980s Inflation Crisis

Historically, when inflation skyrocketed in the 1980s, the Federal Reserve took drastic measures to combat it. Under the leadership of Paul Volcker, interest rates were raised to unprecedented levels, reaching as high as 20% or even higher. Despite the temporary disruption to the economy, inflation was successfully brought under control, demonstrating the effectiveness of such measures in the long term.

Implications for Mortgage Rates and Homebuyers

These historical precedents highlight the risks and rewards associated with raising interest rates. For homebuyers, a rise in mortgage interest rates can significantly impact the affordability of housing. It is therefore crucial for potential and current homebuyers to lock in fixed mortgage rates before rates rise, as locking in a low rate can provide financial stability and peace of mind.

Avoiding the Trap of Rising Interest Rates

To navigate this complex economic landscape, homebuyers should stay informed about the dynamics of the base rate and keep an eye on official announcements from the Central Bank. The CB plays a crucial role in influencing the level of interest rates, including mortgage rates. Therefore, staying up-to-date with base rate changes and their implications on mortgage rates is essential for making informed decisions.

Further Resources for Understanding Interest Rates

For those who prefer a more visual and concise breakdown of interest rates and their effects on growth, I recommend watching the following video:

[Short Video on Interest Rates and Its Effects on Growth]

To find more detailed information on mortgage applications and what might affect your monthly payments, I suggest the following resource:

[Site to Find More Information About Mortgage Applications and Monthly Payments]

Additionally, any further information can be found in an answer written by Julian Lyman on [Julian Lyman's Expert Post on Mortgage Interest Rates].

In conclusion, while the economic indicators suggest that mortgage interest rates are likely to rise in 2019, staying informed and proactive can help mitigate the risks associated with these changes. By understanding the role of the Central Bank and the base rate, homebuyers can make more informed decisions about their finances and future homebuying plans.