War. Curves. Drama.
These may sound like buzz words of a summer blockbuster, but they are the central themes of our current financial markets and why mortgage rates are in a free fall.
All of these factors (scroll down for the backstory on each) are pushing mortgages rates to historic lows, and giving nearly EVERYONE a reason to consider refinancing. Yesterday I quoted a rate I don’t think I’ve ever been able to offer…2.875% (3.17% APR) on a 10-yr fixed loan. Yes, a fixed-rate mortgage under 3%!!!
I have spoken to many clients in recent weeks, but I haven’t had a chance to connect with everyone. Many of our clients are refinancing for a wide variety of reasons, such as:
Lower interest rates and monthly payments
Cash out to pay off credit cards or student loans
Cash for home improvements
Remove PMI or adjustable rate 2nd mortgages
If any of these scenarios sound like they may apply to your finances and we have not yet spoken, please reach out to me ASAP. I’ll be working through the weekend to be sure I help my clients take advantage of these rates before they change. My team and I promise to get back to you quickly with no-nonsense advice on your refinance options.
The escalating tensions between the US and China have the global markets very concerned. If it costs more to trade goods between the world’s two largest economies, then less goods will be traded. This will slow spending, profits, and potentially lead the world into the next global recession. We are watching this story closely, particularly as it affects mortgage rates.
Typically, the longer you invest your money, the greater return you should expect on your investment. For example, putting your funds in a 5-yr Certificate of Deposit (CD) will typically have a higher return than a standard savings account. If illustrated on a graph curve, the return on your investment (also called a “yield”) line goes up the more time your money is invested.
This is also generally true when investing in US government bonds (also called “T-Bills”), but there have been a few instances in the last 70 years where this graph becomes INVERTED, meaning a bond buyer actually realizes a higher return from a shorter-term bond. And EVERY time this bond yield curve has become inverted since 1969, the beginning of a financial recession has followed in the months after. On August 14th, 2019, this yield curve became inverted for the first time since 2007 (a year before the latest recession), and the 30-yr bond yield hit an all-time low. During recessions, mortgage rates tend to be lower, so the recent foreshadowing has pushed mortgage rates lower as well.
Our teammate, Chris McGann, recently said that President Trump has more influence on the financial markets than Federal Reserve Chairman Jerome Powell. He has a point; due to Twitter and 24/7 media outlets, the financial markets are aware of the President’s political agenda and personal diatribes on a constant basis. As arguably the world’s most powerful person, the President’s actions, ambitions, and tweets must be considered by the financial markets.
The “Trump Effect” however, may be losing its potency, as the markets seem to be accounting for the fact a tweet rarely becomes legislative policy. Regardless, the unreliability of the signals President Trump provides the markets make things uncertain. This uncertainty is leading to lower mortgage rates.
Bottom line: mortgage rates are low and they may fall lower if these factors continue to plague our financial markets. While this may be unpleasant for your retirement portfolio, it creates tremendous opportunities for refinancing your mortgage. Call us to help you easily navigate your options.