Freddie Mac reported, on Thursday, that the average 30-year fixed mortgage rate was 3.73% down. The 15-year fixed-rate mortgage average 3.16% down nearly .09% from previous years. The fixed-rate mortgages are tracked by the 10-year U.S. Treasury note, which itself is down 0.36%.
The drop-in rates and the treasury note are primarily due to the increased investment in more secure investments by investors that are fearing the increasing tensions between China and America. The rising trade war is not the only worrying situation in the world with other geopolitical conflicts on the horizon. Many American investors are looking inward instead of foreign markets.
When international politics make the economic waters rocky, many investors choose to invest in bonds. Bonds historically are one of the safest forms of investment and are a great indicator of either economic growth or stagnation. Since bonds are more actively traded in times of decline.
Bonds are very much like mortgages. Where it is quite simple for the average person to buy a bond, offering a mortgage is infinitely harder. But for financial institutions that specialize in lending money, mortgages are just like bonds. A somewhat secure long term investment. In this way, the bond market can give some insight into the mortgage market.
The two most prominent financial institutions in the housing market are Frannie Mae and Freddie Mac. Neither Freddie nor Frannie can give mortgages out themselves but buy them from other financial institutions. These two institutional are fundamental to investor confidence in the housing market. When Frannie and Freddie are regulated and making sure that mortgages can be paid back, those mortgages are worth more. In recent years the confidence in Frannie Mae and Freddie Mac has waned in the eyes of some investors.
With the rise of President Trump, there have been several appointments that have been more in line with business interests. Mark Calabria is one of those appointments that most likely will allow for more significant deregulation. Calabria is the newest regulator that is in charge of Frannie Mae. He has stated that he doesn’t want to upset the market and its natural forces. In essence, he supports that trends that have aroused since the 2008 financial crisis. Though the future remains unknown, what can be predicted is that Calabria with set the course for the housing market in the years to come.