Trade Battle Sinks Mortgage Rates

Mortgage rates fell to fresh multi-year lows this week as intensifying trade tensions rattled markets.

Bond yields, which influence mortgage rates, have been consistently sliding over the past few weeks, as investors eagerly expected an easing to monetary policy.

This week, however, rates fell sharply after the U.S. and China each took steps to escalate their months-long dispute. Just a few months ago, it appeared that the two nations were on the cusp of a trade deal. Today, they are at an impasse, with an agreement nowhere in sight. This week’s escalation of the conflict greatly overshadowed a series of market-moving economic reports – including July’s jobs data, typically the most watched report each month – and pushed mortgage rates down sharply, as investors sought the safe haven of government bonds.

With a light dose of economic data on deck for the coming week, the market’s attention will likely remain on gauging the impact of the trade war on the global economy. Thus far, the developments haven’t been encouraging: In an effort to spark economic growth, the central banks in New Zealand, India and Thailand each cut interest rates by more than experts had expected. With trade-related uncertainty and the prospect of more rate cuts – both in the U.S. and abroad – unlikely to disappear in the near future, it appears that these multi-year low mortgage rates will be with us for a while.