Looking for the best time to refinance? Wait until 2020

Interest rates to dip substantially

Most economic signs point to an economic slowdown coming in 2020, with some even saying there will be a recession.

Several mortgage lenders are said to be preparing for a more favorable refinance market the same year and a note from Capital Economics backs up that strategy.

“Everyone is getting ready for the coming refi opportunity in 2020,” one mortgage lending CEO tells HousingWire. “We are all positioned today to be ready for this time.”

In an interview with CNBC, President Donald Trump told Joe Kernen he is “not thrilled” about interest rate hikes and that the Federal Reserve could jeopardize the economic recovery with further increases.

So what’s going to happen in 2020?

“Both the consensus and financial markets are coming around to our view that the Fed will cut interest rates in 2020, but we still think they are underestimating how soon and how fast the Fed’s policy cycle is likely to turn,” said Capital Economics in a note to clients.

“We expect that a sharp slowdown in economic growth next year will prompt the Fed to stop hiking rates in June 2019, and ultimately trigger at least 75bp of cuts in the first half of 2020," they said.

Most sources still expect rate hikes going into next year, but secondary market investors are beginning to worry that rising interest rates will begin to meaningfully impact the housing market for new mortgages.

Are we less than two years away from a recession? The experts at Capital Economics see a sharp downturn, but not severe enough to cause a recession.

“Our view is that both markets and the consensus are still underestimating just how quickly the economy is likely to lose momentum next year, as the fiscal boost fades and monetary tightening bites," they said.

"Our … consensus forecast that economic growth will slow to just 2% next year is why we expect the Fed to call time on its rate hiking cycle by the middle of next year,” they concluded.

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