Should you lock your Denton TX mortgage interest rate at the time of application? If you are buying a home, it’s a difficult question to answer. As early as last week Treasury bears were screaming at the rooftops that yields (and by default mortgage rates) were going to shoot higher, as evidenced by the 10-year Treasury crossing a supposed line in the sand above 3%. What a difference a few days makes!
This morning the yield on the benchmark 10-Year Treasury dipped to 2.82 percent, retracing 29 basis points from the recent “line in the sand” highs. Along with the fall in Treasury yields, the rates from your favorite Denton TX mortgage provider have also fallen. So what could have changed to halt the recent rise in mortgage interest rates? In a word…debt. In this case it was renewed alarms about contagion in Italy, and Italy’s banking system.
As I have told customers repeatedly during the last year, I’m not all that worried about a sharp rise in mortgage interest rates, at least not a sustained one. The reason is pretty simple. The global economy rests on a massive pile of debt. Much of that debt was created in response to the Great Recession. The Federal Reserve has been front and center helping the U.S. government avoid fiscal discipline, enabling larger debts and deficits every step of the way.
To those who are not versed in finance or economics this may not seem significant. Many pundits in the real estate industry do not understand the larger macroeconomic factors in play, and many of those who do are loathe to discuss it. In Layman’s terms, it’s not polite dinner conversation. If you are looking to get a mortgage and buy a home, however, it’s important information to understand. Debt matters, and it matters more than ever with a global economy drowning in it.
If you are deciding whether to lock your Denton Texas mortgage interest rate, see what options your mortgage provider offers in terms of floating or locking. Lenders offer various programs to suit your timeline. If you are not in a big hurry to close, there’s a chance you may be able to float, and find an opportunity within this latest Fed rate hike cycle to secure a better deal. Even though the Fed is trying to raise rates, they have limited control over real long-term rates because those are determined by economic strength (or lack thereof) and real demand (aka the REAL economy).
Contrary to the endless spin you hear in the media, and particularly the real estate industry, the U.S. real estate market is not as healthy as it may seem, even here in the big D. Yes, things are humming along quite nicely for now with low inventory and record high prices, but far too few real estate practitioners have paused to question how we arrived at this juncture. There are some interesting developments of late in U.S. mortgage banking, courtesy of the Fed’s intervention in the markets.
“Instead of boosting job growth and home affordability, the good citizens at the Federal Reserve have through excessive regulation and QE engineered scarcity of homes and a declining market for mortgage finance – precisely the opposite of the goals they pretend to pursue.”
With home prices at or near record highs and monthly mortgage payments pushing up against extremes, more borrowers, particularly at lower price points are stretching beyond their means. This has opened the door for a new crop of predatory subprime lenders. You also have a new batch of home flippers playing a dangerous game of speculation with limited affordable housing inventory.
If these alarming new trends sound familiar, they should. We saw some of the same activity leading into the last housing crash. The unfortunate reality is that little, if anything, has changed with America’s banking system. It’s still as toxic and corrupt as before. The only difference this time around is that the bubbles (and the massive debts that built them) are spread among multiple asset classes, not just housing. You can thank the Federal Reserve for that one.
There is a distinct possibility, a possibility that I happen to agree with, that we are eventually headed for lower yields and mortgage rates in the not-to-distant future. As Dr. Lacy Hunt explains, it’s all about the debt, and the diminishing returns that come with it.
In this latest interview with Macrovoices, Dr. Hunt makes the case for continued stagflation, and the ultimate deflationary forces that will result in lower yields, and by default lower rates.