Shelter Six:  Trade Tensions with China Actually Good for Rates

May 13, 2019 by · Leave a Comment 

Trade tensions with China escalated at the end of last week with the U.S. more than doubling a tariff on Chinese imports.

China retaliated this morning by increasing tariffs on U.S. imports, and the result was a huge drop in the stock market.

Trade restrictions reduce the outlook for inflation, so any escalation in a trade war will actually be good for mortgage rates pushing them lower.

Before the drama with China, last week’s inflation news was already very good as the April Consumer Price Index increased less than expected.  Inflation continues to be a non-issue.

The Mortgage Credit Availability Index published by the Mortgage Bankers Association (MBA) indicates that credit availability has more than doubled since late 2012.

The index, however, is still only one-fifth of where it was at the height of the market in mid-2006, but the MBA expects credit availability to continue to grow as we move forward.

Rate Update

Both a lack of progress in Chinese trade talks along with weak inflation data contributed to mortgage rates falling modestly last week.

This Week

Retail Sales and Industrial Production figures are both due out on Wednesday with Housing Starts due out on Thursday.  Investors will also be watching for more news about the trade negotiations between the U.S. and China.