August 8, 2019

Dog Days Unleash Financial Frenzy

Just in time for the dog days of summer, a little economic unrest has been unleashed.

On July 31, 2019, the Federal Reserve cut its baseline interest rates by a quarter point, despite a booming domestic economy. During the same week, President Donald Trump stepped up his rhetoric with threats of more tariffs in his protracted trade war with China.

The result? Well, the booming bull stock market tanked a bit as investors ran toward safe-haven bonds, gold and currencies to guard their portfolios from the predicted volatility vibrations.

OK, so equities were hit. But does all the financial posturing affect the state of your personal mortgage interest rate?

In the case of that stampede toward low-risk investments like 10-year Treasury bonds, the answer is a pretty strong yes. The 30-year mortgage rate generally moves where long-term bonds do, because they are similar investments - steady, safe and fixed.

As far as the Federal rate, the question is more nuanced. While the federal baseline rate (the rate banks charge to lend to each other) can filter down to the mortgage market, it may also have little to no effect at all.

The rates we hear quoted in the media are based on ideal borrower scenarios - something most of us aspire to, but few of us will ever realize.

On a macro scale, rates are indeed influenced by several parts of the financial markets. But the individual mortgage rate a mortgage lender ultimately offers you is also influenced by about 30 more personal factors, including loan term, loan-to-value ratio, credit rating and loan purpose.

No rate quote is final until your loan application has been full evaluated, along with all its accompanying documentation.

The one thing that seems certain is this: If you can find what you’re looking for, the best time to buy a home is always “right now.”

The common belief – maybe better called a common hope - is that house prices are correlated to interest rates. When the rates rise, the prices of homes for sale must fall, because otherwise those homes will become less affordable – right?

Sorry. There's no strong relationship between house prices and interest rates. Rates rose steadily throughout 2017 and 2018. Although the acceleration slowed, prices continued to rise.

Constantly waiting for things to get “better” is a risky game.

Up and down, down and up. Try to wait for the perfect time, and you might miss out. The sooner you buy, the sooner you start building equity.

The going is good. Mortgage rates have been at historic lows for more than a decade and remain extremely attractive in 2019.

Bay Equity’s loan officers are available around the clock to answer all your questions and will work tirelessly to get the best terms. The loan that has seems to have the lowest interest rate may not be the best product for your particular situation.

Our LO’s and support staff are the best and brightest in the business, so clients can count on a lending experience that is as easy and straightforward as possible.

Contact your local Bay Equity branch today.

We’re here to get you home.