Rates Are On The Rise, An Iffy Trade Deal and A Done Deal Brexit
Here’s the latest from FreddieMac (the government-owned corporation that buys mortgages and packages them into mortgage-backed securities)
With Federal Reserve policy on cruise control and the economy continuing to grow at a steady pace, mortgage rates have stabilized as the market searches for direction. The risk of an economic downturn has receded and, combined with the very strong job market, it should lead to a slightly higher rate environment. Since early September, when mortgage rates posted the year low of 3.49 percent, rates have moved up to 3.73 percent this week. Often, while higher mortgage rates are deleterious, improved economic sentiment is the reason that these higher rates have not impacted mortgage demand so far.
BUT IT IS STILL A GREAT TIME TO BUY!!! Rates are STILL at 40-year historic lows! If you want to get into a home, refinance to retire some debt or make home improvements or put your kids through school or maybe even help them buy something, PLEASE GIVE ME A CALL 😊
Done Deal or Devil In the Details?
On the trade tariff front, even with the headlines reading that Trump has ‘signed off’ on a phase one trade deal with China, the truth is that there is no deal—yet. Even with the questionable state of the deal, the markets reacted quickly (and harshly for bonds) yesterday at the news. However, today investors have reversed their optimism and mortgage-backed securities (the investment instrument that drives mortgage rates) have rebounded slightly and stocks are mixed as investors grow anxious over the details of this “deal”. In truth, China hasn’t blessed this thing yet. Remembering that we “had a deal” in October that just needed a few small things worked out for signatures that never happened, perhaps has the market feeling a little less settled.
Brexit, Dear Brexit
Boris Johnson pulled off what Theresa May could not. Now that he has the clear majority in Parliament, it is highly likely that Brexit will be done by the end of January 2020. The UK will exit the European Union but what that means for the market is still as uncertain as ever. Some see it as potential windfall for the US economy because they will look to the us for increased trade. But we’ve already discussed the nature of trade talks earlier in this piece. We just don’t know, and that uncertainty will be felt in the bond market for a while still. Politics aside, most economists, with minor exception show that Brexit is economically bad for the UK over the next ten years with US and EU outpacing UK GDP by a large margin. If you are interested, you can read more here and here on the economic impacts of Brexit.
A Quick Word on Employment Statistics
There were 252,000 individuals that filed for unemployment benefits for the first-time last week. This was 49,000 higher than the previous week and 39,000 higher than estimates of 213,000. It makes sense that this number is higher because some people were not going to file during Thanksgiving week in the prior report, and they were likely pushed into this report. But there may be some weakness here that could be concerning. The next report will be important to follow and will likely show some clarity on which way is right and which way is wrong.
Product of the week
Our Peak loan program allows the purchase of a home up to $1.5M with only 5% down*. Additionally, the loan terms can be extended up to 40 years, with the first 10 being interest- only payments.
The Peak 2nd Lien program allows the option to access the equity in a current home (up to 95% combined LTV) and use it toward home improvement, debt consolidation, or as a source of down payment on a second home.
*Please visit our Disclosures page for more details for all loan types.