Mortgage Rates Are Falling

Why are mortgage rates falling? Hint: It’s not because of the FED!  I have written and posted many times on that topic, reminding you that the FED does not control or set mortgage rates.  Yes, they did lower rates at their last meeting and this has been big news that was reported on over and over again.  So what has actually caused mortgage rates to dip recently?  Why are they falling when for years everyone has been saying they are heading up?


The short, one word answer is: China.  The expanded answer is that some weeks ago, new and steep tarrifs of up to 10% were proposed on $300 billion worth of Chinese goods starting September 1st.   This was to be in addition to the 25% tariffs already in place on over $250B worth of goods.  How this all impacts mortgage rates, is that a trade war between the US and China that continues to heat up could ultimately spell a slow down for the US economy.  While I don’t think this will ultimately happen - a US slowdown - the threat or fear of it, alone, is enough to spark a sell-off in the stock market (which happened) and have investors moving that money into safety, or BONDS.  This activity will drive down mortgage rates, since they loosely follow the US 10 Year Treasury Bond.  


I always say that if you want lower mortgage rates, just pray for chaos.   Seriously!  This is the reason why mortgage rates haven’t climbed up sharply and stayed up as so many experts and market officials have been calling for over the last few years.  With geopolitical turmoil present (China trade war, BREXIT worries), there is just too much out there to give investor the jitters from time to time, causing them to sell off their positions in stocks and move into safe places like bonds.  That activity drives down mortgage rates and ultimately further stimulates housing financing and the overall real estate market.  With cheap money (rates) and a strong labor market (wages, salaries, jobs), borrowers remain confident in entering the real estate space here in the Bay Area and trading out their rent check for a monthly payment towards their long-term financial picture and personal wealth.  


Lower rates here in the San Francisco and Bay Area market can have not only a psychological impact by injecting confidence into would-be buyers, but also truly impact affordability for many people who have been on the fence about buying in the first place.

Email me any time to check on your own affordability picture.

Arjun Dhingra