The turmoil in the financial markets has caused home loan rates to drop to their lowest level in over two years. Whenever investors get afraid, they sell stocks and buy bonds instead, causing home loan rates to improve. Three main factors triggered the recent drop in interest rates:
1 – Escalation in the US-China trade war. The latest round in the trade war saga had President Trump announcing more tariffs, China lowering the value of their currency, and the US formally labeling China a “currency manipulator” which could lead to more tariffs and retaliation.
2 – Slowdown in the world economy. Recent economic reports illustrate that the US-China trade war is taking its toll by creating a slowdown in most economies across the world. Ironically, the recent economic reports here in the US have been generally positive.
3 – Fears of a recession in the US due to the “inverted yield curve.” Long-term government bond yields are now lower than short-term government bond yields. This typically predicts a recession, but it may be a false signal this time around due to the factors discussed in another article called, “Are Recession Fears Overblown?” Regardless, investors are worried. When investors are worried they buy more long-term bonds, causing the yield curve to invert further, and home loan rates to drop.
Although nobody can predict the future, the thing to do right now is to review your house loan. Let’s see if there could be any potential savings due to the recent drop in interest rates. Contact me for a home loan check-up and let’s explore your options!
Source: CMPS Institute
Carrero Mortgage Advisors, LLC
3600 Red Road Suite 310,
Miramar, Florida 33025
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