As the sell-off in the stock market continued, so did the decline in mortgage rates. Concerns about the pace of global economic growth were again the primary factor. An additional drop in the price of oil also impacted the markets. Mortgage rates ended the week lower.
The Chinese government has begun a transition of its economy from one dependent on exports to an economy more reliant on domestic consumption. This transition has resulted in a slowing of its economic growth. The GDP data released on Tuesday revealed that Chinese economic growth dropped in 2015 to the lowest level in 25 years. As China slows, so does global economic activity. This impacts the financial markets by driving stock prices lower and reducing the outlook for future inflation. Lower inflation is good for mortgage rates.
The price of oil, which has fallen to the lowest level in over a decade, has also weighed on the financial markets. One effect of this is a lower inflation rate. The consumer price index (CPI) data for December released on Wednesday revealed that 2015 saw the second-lowest annual rate of inflation in the last 50 years with an annual increase of just 0.7%. Only 2008 was lower, and it too was affected by a large drop in the price of oil. With an ongoing imbalance between supply and demand, the price of oil is not likely to put much pressure on inflation anytime soon.
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Source: MBS Quoteline
