Mountain Mortgage Guy: Political drama could impact homeowners any day (column)
If you plan to apply for a mortgage loan, or have an adjustable rate, then expect the unexpected in terms of interest-rate fluctuations. Never in the 242-year history of the U.S. government has there been such a volatile mix of politics and drama playing out.
Indeed, if Danielle Steel, John LeCarr, Ian Fleming and Christopher Reich had all collaborated with the National Enquirer on writing a novel about sex, politics, power, ego, money and intrigue, they could not begin to match the reality show called the Trump administration.
The outcome — or, more importantly, perceived outcome — of any one of a dozen issues could have profound impacts on the global economy, impacting everything from the price of a cup of tea from China to roiling global financial markets, in both good and bad ways.
In the past, when global crisis shook the financial world there has always been one predictable trend though that was the glue that kept the United States on top, and that was the perceived safety of investors putting their money in U.S. bonds. Through it all, the ultimate safety net was the full faith and backing of the U.S. government to pay its debts.
So whenever stocks tanked, people bought bonds, and that meant lower interest rates and cheap gas to power spending to create demand for goods and services and create jobs. But during the last stock market downturn two weeks ago, that expected flight of capital to the bond markets did not happen. Bond demand was insufficient to drive down rates.
A Wild Ride?
Part of the problem is the supply of bonds is increasing geometrically as the Unite States rolls over hundreds of billions in maturing debt issued during the Bush and Obama administrations. But my sense is investors question the underlying ability of the U.S. government to effectively deal with the seemingly endless list of scandals, humanitarian crises, trade wars and political crises facing it while also effectively growing the economy.
What this means to homeowners is that mortgage rates could be in for a wild ride and caught in a perfect storm of historical proportions. There are roughly an equal number of factors that could push them up, as well as down. Trade wars could destroy more jobs than they create and tap the inflation pedal, or maybe not. Political crises could wreak havoc on stocks, but if things are even worse in Asia or Europe, then investors may end up sending their dollars to the U.S. bond markets.
I’ve been telling my mortgage clients lately to lock in their rates. Things could get a little better, but they could also get a whole lot worse in a matter of hours.
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 questions from readers. His website and blog can be found at http://www.mtnmortgageguy.com.