Category: Professional

The stage is set this week to be an incredibly volatile one filled with newsworthy headlines.  These stories could have huge implications for mortgage rates.  Generally speaking, mortgage rates fall when economic indicators are sluggish or uncertain.  This week’s scheduled events could make markets very nervous and, depending on the outcomes, push rates lower.

Here is a list of stories in the making this week:

December 10^th – The World Trade Organization (WTO) will cease to operate.  This multi-lateral trading system underpins 96% of global trade, but our American government has put a block on appointing new judges.  Two judges are retiring this week, so there will not be enough judges to hear new cases. While this event has been in the making for months (if not years), its significance is noted, especially given the rising trade war tensions around the world.  With no “sheriff in town,” the “gun-slinging cowboys” of global trade may feel brazen to impose stiffer trade rules and costs.

December 11^th – The last Fed press conference of 2019.  After two back-to-back rate reductions in the Federal Funds rate, most analysts are expecting The Fed to not take any action in this week’s meeting. However, what they say in their press conference could have ripple effects through the world’s financial markets

December 12^th – British election that will shape the fate of Brexit.  A special election is being held on the hope that the Prime Minister’s party will win majority in their parliament.  If that takes place, the Conservative Party’s agenda, which includes a quick exit from the European Union, will forge ahead more swiftly.

December 15^th – New round of tariffs set to take effect on $160,000,000,000 of Chinese goods (that’s a lot zeros!!!). With no sign of a written trade agreement between the two biggest economies on the globe, it is possible the next round of scheduled tariffs on Chinese imported goods will take effect.  While prior tariffs have targeted production materials, this tariff will directly apply to finished Chinese goods sold in America, including cell phones and other electronic and household products.  With less than a week to go, it is still uncertain if this latest tariff is a threat or a promise.  Its anybody’s guess how the next few days will play out in the financial markets, and its by far the most important story to follow in the coming days.

Indeed, uncertainty is high, and I think there is potential for mortgage rates to fall in the days ahead.  Peek back at my August and October blog posts that share my thoughts on these story lines in the past, and give me a call if you want my forecast on whats ahead.

Over my career, I’ve referred to my thoughts on the markets as forecasts. For example, my yearly post about the market is titled the annual market forecast, and I’ve been known to compare timing the markets with forecasting the weather.

Today I’m taking it a step further; I’m going to make a bold prediction about where interest rates are heading. I’ve never been so daring in my career, but in doing so I’m hoping to get you prepared to take advantage of what I believe will be record low mortgage rates in the coming months.

If I’m going to make such a provocative declaration, I want to back it up with data. So, as a fair warning I’m going to show you some graphs. Don’t close your browser just yet; I promise to make it impactful and easy to follow (it may be easier to watch the video starting at 1:15).

OK, here we go!  Above is a graph of the interest rates on 10-yr US Treasury Bonds. These rates are closely correlated to mortgage rates, so we’re just going to focus on the direction of the rates. As you can see, rates have been in mostly a free fall for the last year, and we’ve helped many clients in the last two months take advantage of these low rates. In fact, I’d like to focus on these recent two months where this jagged saw tooth action has been and show you where on this timeline our clients have been locking rates.

Beginning in August, refinance clients began locking in their rates; each of these X’s indicate when one of my clients locked their loan. We were on a roll until just after Labor Day, and then rates took a big jump up on the announcement of a future meeting between US & China trade officials. During this volatile time, several clients submitted an application to refinance with us, but we recommended against locking in the hopes the markets over-reacted and would settle back down. That’s indeed what occurred, and we had a number of clients lock in their low rates in the “trough”. No one locked at the peak!

Now history appears poised to repeat itself. For the last week, rates have been on a steep rise as verbal agreements were made in the widely anticipated trade meetings. The US and China economies are the two largest in the world, so easing tensions of a trade war is definitely good news. But, I think the markets are being overly optimistic. First off, none of the details of this trade agreement are in writing yet. That is supposed to be done over the next several weeks. Secondly, analysts say the agreements do not address some of the more critical issues of the trade tensions; this is being called simply Phase 1 of trade discussions. And thirdly, trade and tariff policies can be set unilaterally by a president in the name of national security. They can also be changed or removed unilaterally.

Bottom line, the trade war outlook is still uncertain, and when the markets figure that out then rates will fall. There are other factors at play that support my theory, and I’m happy to share them with you individually, but for fear of losing my audience I’m just cutting to the chase…mortgage rates are poised to fall. That is my bold prediction; and here is my strong recommendation; begin a refinance application now so you can be prepared to lock in a low rate if my prediction comes true. A trusted colleague of mine put it this way…if you go tailgating at a football game you don’t want to still be in the parking lot when the big play happens. Sure, the roar of the crowd will prompt you to make your way in, but by the time you get into the stadium you’ve missed the moment. Grabbing a low rate on a refinance is much the same; you need to be in your seat, watching the game in order to participate in the exciting plays.

I can’t lock an interest rate until the needed paperwork to complete an application has been submitted. So, let’s do that now. If rates drop during the holidays do you really want to scramble to grab w2s and bank statements for me then? No, lets do it now. I’ll absorb any upfront application expenses for you, and if rates don’t drop we don’t need to complete the refi. There isn’t really any downside for you coming into the game: if my prediction is right you’ll get to celebrate with everyone on the field with a great refi rate, and if I’m wrong you’ll have a front-row seat to my crystal ball fumble.

Contact me so we can discuss ways we can make it easy for you to start your refinance application ahead of the next interest rate down turn.