New tariff plans pull mortgage rates downward
Mortgage rates fell sharply Thursday, the day after one of the most significant Federal Reserve meetings in history.
But mortgage rates aren’t falling because of that meeting, at least directly.
They are plummeting today due to new 10% tariffs proposed on $300 billion worth of Chinese goods starting September 1. These are in addition to 25% tariffs already on $250 billion of goods.
President Trump announced the tariffs in a tweet at around 1:30 PM ET Thursday.Capture a historic rate now. (Jul 5th, 2020)
Why are mortgage rates affected by new tariffs?
Presumably, an escalating trade war means the U.S. economy might be in for troubled times. Trade could stall between the two giants.
Economic uncertainty would spur the Fed to cut rates more than markets currently anticipate. Now, another rate cut is a real possibility at the next Federal Reserve meeting, adjourning September 18.
At the July 31 meeting, the Fed cut the federal funds rate by 0.25%, but warned that future cuts weren’t a sure thing.
Mortgage rates ended up lower, but not by much. Markets were expecting the Fed to announce more reductions in 2019 and 2020.
But the new tariffs all but guarantee another rate cut in September, which has sent mortgage rates through the floor, at least for today.Verify your new rate (Jul 5th, 2020)
New tariffs make up for neutral Fed statement
Many homeowners and home buyers looking at FHA, VA, USDA, and conventional mortgage programs may have wondered why mortgage rates didn’t drop more after the July Fed meeting.
It was because markets had already priced in a rate cut plus additional rates cuts later this year.
What they got was a Fed that issued a tepid post-meeting announcement saying, basically, not to count on any future cuts.
While mortgage rates ended the day lower, it wasn’t the historic drop that many mortgage shoppers were looking for.
Luckily, today might deliver.
President Trump may have responded to the Fed’s luke-warm stance by announcing new tariffs on China. It’s a way to ensure more rate cuts this year, which the president has not been shy about asking for.
Whatever the reasoning for the tariffs, mortgage shoppers are benefitting from rates that are headed toward 3-year lows.
If you’ve been waiting to capture a historic low rate, today might be the day.Verify your new rate (Jul 5th, 2020)
This is a developing story that we will update as more information becomes available.