Curve

Crushed stock market, trade wars push mortgage rates back to 2016 levels

Tim Lucas
The Mortgage Reports editor

Mortgage rates extend huge winning streak

The everyday consumer thought the Fed rate cut on July 31 was the key to lower mortgage rates.

To everyone’s surprise, that was just the opening act.

The bigger mortgage rate mover happened the next day, when Trump announced new tariffs on Chinese goods starting September 1. 

This sent markets wondering if a trade-war-induced recession was on the horizon. 

In response, mortgage rates fell near 3-year lows, making FHA, VA, USDA, and conventional mortgages cheaper than they’ve been since late 2016.

Ready to capture a historic rate? Today could be the day.

Start your mortgage rate request here. (Nov 19th, 2019)

Mortgage rates today: Lower than after the Fed meeting

Rates are dropping today in the aftermath of tough talk on both sides of the U.S.-China trade war.

What’s surprising is that this situation is having a more profound effect on mortgage rates than did the recent Fed meeting.

The group cut its benchmark rate by 0.25% on July 31. But that was expected by markets. The effect was significant, but not game-changing.

The next day, President Trump announced via Twitter that a new 10% tariff would be placed on another $300 billion in Chinese goods.

In response, China devalued its currency. This makes Chinese goods cheaper to U.S. consumers, effectively taking the bite out of new tariffs.

Wall Street wasn’t pleased.

The Dow Jones suffered its worst day of 2019, dropping more than 750 points.

With a stock market rout, we often see mortgage rates plummet, too. Investors want to park money in safe assets, namely mortgage bonds. This causes higher demand and lower rates for mortgage bonds, which directly affects consumer mortgage rates.

The result was mortgage rates nearing 3-year lows, back to levels not seen since October 2016.

But China has already backed off its currency devaluing game. Markets are recovering, which could spell higher rates soon. If you’re in the market for a home purchase or refinance, it could be a great day to lock.

Verify your new rate (Nov 19th, 2019)

Fed cut vs trade wars: Mortgage rate improvement in numbers

The average consumer probably thinks the July 31 Fed rate cut had a bigger immediate effect on mortgage rates than the president’s tweet about new tariffs.

They would be wrong.

According to MBS Quoteline, a mortgage rate monitoring service, mortgage bond prices rose about 0.20 after the Fed cut, but about 0.40 after new tariffs were announced.

As mortgage bond prices rise, mortgage rates fall. A 0.40 price increase has a significant effect on mortgage rates for the end consumer.

Mortgage rates change fastest with unexpected developments, not expected ones. The Fed cut was expected by the time it happened. No one saw new tariffs coming.

But as a consumer, you don’t have to know the ins and outs of market movement. You just have to recognize an opportunity. And this is it.

Mortgage rates have dropped around 0.25% since late July, according to The Mortgage Reports’ daily rate survey. That’s a fast drop, and one that shouldn’t be taken lightly.

If you’ve been on the fence about buying or refinancing, now is the time.

Verify your new rate (Nov 19th, 2019)