If you remember your history lessons, you may remember hearing about the Black Death plague that devastated Europe in the 14th century. We know about how much it affected the world’s population, but most people never thought about this period in history in terms of mortgage rates—at least not until now.

Debunking the Secular Stagnation Theory

It all started when former White House economist and Treasury Secretary, Larry Summers, claimed that our recent low-growth low-rate economy is likely to persist because of certain causes that are here to stay for awhile. This popular economic theory is best known as “secular stagnation,” and it has been cited by economists since the Great Depression. However, Paul Schmelzing of the Bank of England saw things differently and wanted to use history to prove otherwise.

Schmelzing traced personal loan rates all the way back to 1311 and found that today’s unusually low mortgage rates are really not an aberration. In fact, they are rather consistent with results over the past 700-plus years.

“Against their long-term context, currently depressed sovereign real rates are in fact converging ‘back to historical trend’—a trend that makes narratives about a ‘secular stagnation’ environment entirely misleading, and suggests that—irrespective of particular monetary and fiscal responses—real rates could soon enter permanently negative territory,” wrote Schmelzing in his research paper.

Looking at Today’s Numbers

Currently, roughly $11 trillion in global sovereign debt carries negative yields. That basically means that investors are paying for the right to buy those bonds. However, the total of negative-yielding debt is actually down from 2019 when it was up to $17 trillion.

Secular stagnation theorists argue that a global wealth tax is the cure for secular stagnation that has—in their opinions—led to today’s low interest rates and also to growing wealth inequality. Schmelzing’s findings argue that what we see today is not too far out of the ordinary compared to economic patterns we’ve seen throughout modern history.

Time to Take Advantage of Low Mortgage Rates?

However you want to look at the issue or which side you choose to take, it’s clear that the central banks are in no rush to raise interest rates and we should continue to see historically low mortgage rates for some time. This is good news for home buyers and homeowners looking to refinance with a lower rate. Conditions are ripe for a strong buyer’s market.

If you are looking to buy a home in San Diego County or refinance your current home loan, call Transparent Mortgage today at (619) 701-3906 To discuss your mortgage options and to get pre-approved for your mortgage loan.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.