Vail Daily column: China economic meltdown helping US homeowners
I am often asked what makes mortgage rates go up and down. The answer is pretty much anything having to do with global economics, including the price of tea in China, and now it seems like the amount of tea the Chinese drink might have some impact as well.
In fact, the much-talked-about recent Federal Reserve hike to short-term rates probably has far less to do with mortgage rates than the consumption of Chinese tea, or to be more accurate, the consumption of all things Chinese.
Unless you’ve been living in a snow cave in the backcountry for the past three weeks, you probably have heard that all is not well in China — a situation which has triggered a global sell-off of stocks, wiping out trillions of dollars in wealth. While I admit that I don’t know how the tea industry is holding up through all of this, pretty much everything else Chinese is hurting economically and one can speculate that the average Chinese might be watching the family tea budget expenditures, along with everything else.
The impact of the Chinese economic slump has caused investors to once again worry more about the return of their money more than the return on it. Add to this the global oil glut and the demise of numerous oil related fortunes around the world and there are a few fewer billionaires in the world compared to the number of them last month. Unfortunately, that will soon translate to quite a few fewer middle class families in the near future, as companies cut jobs to try to boost profits in efforts to boost share prices.
This economic gloom has triggered another flight of capital into US treasury bonds and other government-backed securities, such as my favorite one: mortgage-backed bonds. When the demand for mortgage-backed bonds increases, mortgage rates tend to drop. This has pushed mortgage rates back to where they sat last fall, and depending on the circumstances of the particular loan, a 30-year fixed can be below 4 percent right now, which is about a quarter percent drop from recent highs.
If you are nursing your sore eyes from reading your most recent brokerage account statement, perhaps you could benefit by lowering your mortgage payment. Or else, if you are looking to buy a place, it’s a good time to make a move and take advantage of this window of opportunity to lock in a great deal on a loan. Mortgage loans these days generally offer a range of options on closing costs, and low-to no-cost mortgages are common. Points and origination fees are pretty much a thing of the past and often the lender will give you a credit to cover other incidentals such as title insurance and appraisal fees.
Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and welcomes mortgage related inquiries from readers. He may be reached at 970-748-0342. Visit http://www.mtnmortgageguy.com for his website and blog.
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