Mortgage Rates Decline With Economic Slowdown And Trade Tension

Mortgage rates in the U.S. have declined sharply.

The escalating trade war is bringing in a global slowdown. This is especially true with declining economic data in the U.S. and China.

However, the housing market is getting a boost in the United States.

With a global downturn, investors are withdrawing money to protect their finances. The next option is the bond market which is causing the 10-year Treasury yield to downslide.

As mortgage rates are closely linked to the movement of the Treasury yields, these rates are seen to move downwards.

The manufacturing PMI in the U.S. has fallen to lowest levels since Sept 2009, says a report from IHS Markit. As the Purchasing Managers Index is a strong indicator of the economic growth of a country, investors feel that the slowdown may lead to a downward spiral in the markets too.

The drop in mortgage rates is however not reflected in brisk home sales.

Chief economist at NAR, Lawrence Yun believes that sales may pick up by the end of the year. As mortgage rates touch historically low levels, the demand to buy will increase, which will help to boost sales, says Yun.

A fixed rate 30-year mortgage rate had fallen to an average rate of 4.14 percent in April. In March it was 4.27 percent, according to reports from the mortgage loan company Freddie Mac. On a year-on-year basis, data shows that the average rate was 4.54 percent in 2018, which is a sharp fall.

With the growth in job creation and wage growth, it will increase home sales and make it more affordable says, Yun from the National Association of Retailers.

Trade tension between the U.S. and China has not come to an end. Chances of an agreement to be drawn soon are fading as the war escalates. This has hurt many businesses, especially as the tariffs are borne by them, resulting in an economic slowdown.