Mortgage rates have ticked down to their lowest level since 2016 and may be going lower. As of early September, the 30-year fixed was at 3.5 percent and the 15-year fixed was at 3.125 percent. This is all happening while the stock market is near all-time highs and unemployment is near all-time lows. Rates usually are a lot higher under these types of circumstances so why are we so low and possible heading lower? Tariffs and the trade war.
The Trump administration is putting on a full court press with China trying to rebalance trade back to the U.S. This potentially is putting some of the other larger economies around the world into a recession. Many are arguing that it could also put our own economy into a recession. Why is that?
Businesses don’t like to invest or hire when there is uncertainty about the economic climate moving forward. With consumers paying more money for items coming from China, sales will decrease. Lower sales will lead to lower profits for companies and lower earnings, which could then lead to companies laying off workers. This could turn into a vicious cycle.
As of now, the one economic engine that is keeping us going is consumer spending. The consumer is still spending at a great pace.
One thing that could happen here if our economy does start to suffer is that the Trump administration could remove the tariffs, which would lift the stock market and bring higher rates.
So, this is what we are recommending to our customers. Refinance into an interest rate that has little or no closing costs. Why? Because rates may go down further next year, allowing you to do it again. A no closing cost loan may be a 1/4 percent higher than one with closing costs, but you have no investment into the loan if rates move down lower.
I feel that we have a good chance to see them lower, but if the tariffs are removed at some point in the future, then we will see rates go up. Consumers should take advantage of what is available now.
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