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November 22, 2013
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Vail Daily column: Will Obamacare lower mortgage rates?

As bizarre as it might seem, Obamacare might just help lower mortgage rates, or at least keep them from rising as quickly. In this world, everything is interconnected, and money is like running water, it all used to belong to someone else and once it goes down the drain (or in the case of money, gets spent) it belongs to someone else.

One of the primary things that influences mortgage rates is the overall state of the economy. If corporate America isn’t having a good quarter, then stocks suffer and investors look for the return of their money as opposed to worrying about a return of their money.

This translates to investors buying bonds which pumps money in funds available for mortgage loans, which means more money is available and mortgage rates drop.

If things are good, then investors go for the return on their money and look to higher yielding, albeit less secure, investments such a stocks. When this happens, the tide reverses itself and rates start ticking up.

So what does Obamacare have to do with all this? This week, Walmart flat out said it, Obamacare is likely to hurt their profits. And if Walmart says it’s so, most likely it is so, and it may be so for every retail chain (and their upstream suppliers) in America.

Whether you like the Walmart corporate culture or not, no one can deny they have some very smart people peering into some high tech crystal balls about consumer behavior; and history has proven them right in a ridiculously high percentage of the time. And as goes Walmart, so goes much of the economy.

What Walmart sees is that consumers who are currently insured under individual policies are often going to be paying much higher premiums, or they are going to go without. Further, employers who provide group policies are expecting to see huge premium increases in the next few years (even though so far they are reportedly within expectations for a normal year), and that will dampen their spirits for hiring.

Those who are uninsured and get insurance have a new budget item in the monthly battle to pay the bills, and those who choose to go uninsured will pay a penalty for doing so.

In all of the above scenarios, consumers will have less disposable income, and that is not something that bodes well for a company such as Walmart who needs vast hordes of consumers buying cartloads full of stuff, quite a bit of which are elective purchases of electronics, housewares, toys and the like. These product lines are some of the most lucrative for Walmart as opposed to their grocery sales which are low margin but steady.

So magnify Walmart’s concerns times a few million smaller competitors, and you get the picture. And fewer sales of toys, TVs, clothing and crock pots mean less production, fewer semi-trucks on the road delivering goods, fewer warehouse jobs to manage the flow, and fewer clerks to ring up the sale.

So if investors are cautious about corporate America’s profitability, they will not invest as heavily in stocks, which will likely have an impact on the cost of bonds, which will tamp down mortgage rates.

Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers.


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The VailDaily Updated Nov 22, 2013 07:47PM Published Nov 22, 2013 02:43PM Copyright 2013 The VailDaily. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.