Travel Ban Effect on Mortgage Rates

Posted by Arjun Dhingra

Since the election, mortgage rates had been ascending on optimistic market data, a hyper stock market, and a stable labor economy. Markets are certainly optimistic, but as I had mentioned in previous posts – good news in these markets is generally bad for mortgage rates. A $750,000 mortgage costs nearly $450 a month more today than it did pre-election. But, as the old saying goes, “what goes up, must come down,” and this is certainly applying to lending rates.

The same market forces that sent rates up are now starting to drag them down slightly. Last month, President Trump signed an executive order that temporarily banned travel between the US and 7 other countries. This type of action sent some nervous waves through the markets where some strong optimism was just present. Nervous markets are very much a good thing for mortgage rates, and while the social impact of the travel ban and sensitivities surrounding it are certainly still being felt, rates are no doubt in decline. The ban is not having any immediate impact on the US economy at this time, but the uncertainty that the markets are feeling is certainly sending a message that perhaps border and immigration control are going to be more of a focus from the administration than economic stimulus plans, tax reform, and infrastructure spending. All of which was assumed when the markets took off post-election. As well, the markets are now starting to fret about tightening trade restrictions with these nations named in the travel ban.

No one has a crystal ball, but there are many arguments pointing to rates falling further this month. The recent action by the administration says, if anything, that the unexpected can be reality in no time at all. The upcoming jobs report, along with provisions/changes to the travel ban, the impending proposal for infrastructure spending and tax cuts are all key benchmarks that the mortgage market will be looking to react to, one direction or another. Home buyers and those looking to refinance should key in on market developments to time their rate locks. Stay tuned on this blog for more updates, but for the time being, rate remain low and continue to trend lower due to recent developments outlined here. For a quote, please Email Me or Call Me anytime.