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Saturday, July 20, 2019

The “Made in China” label is the most recognizable label in the world today, as a result of China’s dominant manufacturing industry. According to Wikipedia, China is the largest exporter in the world, primarily due to its relatively low manufacturing wages and capacity to export globally. Undoubtedly Chinese politics and economics play a vital role with U.S. markets. This week we experienced this again first hand as the United States and China trade wars caused extreme volatility as investors remain on edge about the standoff between the two countries over trade agreements.

A Twitter post (“tweet”) earlier this week by President Trump indicated the U.S. would hike tariffs on Chinese goods, which caught traders off guard and sparked a global sell-off. Trump threatened that the U.S. would increase the tariffs on hundreds of Billions of dollars of Chinese goods from 10% to 25%. The Dow, on Tuesday, posted its biggest decline since January 3, tumbling over 500 points intraday, while the S&P 500 and Nasdaq were down more than 2% after both hit all-time highs last week.

As I have written about in the past, when stocks suffer, often (but not always) a “safe haven” trade will lead investors into long term treasuries. This will typically have a favorable impact on mortgage rates. The yield on the 10yr U.S. Treasury was able to break beneath their firm 2.50% level, which we haven’t seen beneath since early April. For those closely watching bond markets to see the impact on mortgage rates, I would suggest that a firm break beneath a 2.41 level would push mortgage rates down considerably.

The Mortgage Bankers Association reported that mortgage application volume rose last week. Applications to purchase new homes were up 4%, and are now up 5.1% from this time last year. Mortgage rates are about.390 basis points lower than this time last year. All in all, market conditions are extremely advantageous for buyers and owners looking to take advantage of a strong market and favorable mortgage rates.

Bankrate.com had an interesting perspective on rates noting, “Mortgage interest rates are well below where many experts predicted they would be this time last year, going from north of the 5-percent mark in 2018 to 4.09 percent this week on the 30-year fixed.” I have been in touch with many past-clients as well as some new clients who were recently referred to me regarding potential refinancing. People are starting to pay attention to declining rates again. “For today’s homebuyers and refinancers, that means saving hundreds or even thousands of dollars in annual interest payments.”

For one client I was speaking with, the refinance option was a ‘no brainer’ as we considered both his monthly payment (cash flow) savings, as well we the life of loan interest benefits. When I didn’t hear back from him initially, he responded that if rates drop another.125%, I should reach out. The one thing I am happy about in this business is that often “the numbers speak for themselves” and I was able to show him that even if rates did drop another.125% as he was hoping, the benefit to him would merely be $21 per month. Granted, every penny counts, but often I find that people are more focused on the psychological number than the actual financial implication.

I believe that one of the primary roles of a competent mortgage lender is to help manage the interest rate process and forecasts. In this case, we discussed our free “float down” mortgage rate option and our unique “no commitment application process” which can approve a loan in full, while we wait “to catch the best rate” dip. Needless to say, no one will be able to time the markets perfectly, but with the discussions in advance that address refinancing objectives and benchmarks, this is the perfect time to reach out to your “local lender” to start taking advantage of market improvements. Shout out and happy birthday to Leah Escott (also mazal tov), Danny Kaplan, Uri Kanovsky, and Tova Milgrom.

By Shmuel Shayowitz


Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience including licenses and certifications as certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]