NLIC.org

Veronica Said:

What is causing mortgage rates to drop?

We Answered:

On a very fundamental basis, it is that mortgage demand has dropped. Rates can only decrease if the mortgage lenders (1) have access to cheaper funds (2) willing to squeeze their margins.

Regardless of the trade imbalance we currently have, mortgage lenders have money to invest in mortgages and are lowering rates to do it.

It is a further sign that a recession is right around the corner. When the yield curve inverts (longer rates are lower than short term rates), a recession is coming. Just in time for the 2006 elections!