Eave’s “Just the Facts” is a weekly series designed to cut through the noise about home loan interest rates for borrowers and real estate professionals. Eave doesn’t try to play the role of forecaster, who claims to have some special insight. Few do! Instead, our Chief Credit Officer covers what happened in the market last week.
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The headline economic data from last week was the Q2 2018 GDP numbers. Here is a chart that plots quarterly GDP (seasonally adjusted) as a % change from prior quarter.
A lot of headlines have been written about the 4.1% number; politicians and non-politicians alike have pointed to this number to underline a strong economy narrative. It is true. It’s impressive. This late in the economic cycle (soon we will be onto the 10th year of the current economic expansion cycle that began in 2010), the growth in the US economy has been driven by corporate investment.
Zooming into the last five years, we can see the latest GDP trends are moving fairly similarly to personal consumption expenditure. However, the real story lies in the fixed investment by businesses, which has seen a fresh wind at its back since 2017. This is primarily due to the corporate tax cuts enacted by the current government. Suddenly businesses are investing more, which adds to the GDP growth.
However, the question should be asked: If the latest investment opportunities are not worthy when tax rates are higher, what does it say about their quality? Sounds like the economy is being subjected to a sugar rush. Doesn’t it make all the more sense for the Feds to try and rein in reckless spending or poor investments fueled by relatively low cost of debt? If the investment phenomenon pushes GDP growth above the 5% mark, we fully expect the Feds to continue their rate hike programs into next year. None of those increases are baked into market expectations now. The future is unchartered territory relative to history and it’s endlessly fascinating to watch how it is folding out.
Our Updated Jumbo Rates * (as of 07/31/2018)
Our rates moved up by 0.125% across the board, owing to rising bond yields.
5/1 ARM – 4.125% Interest Rate, 4.751% APR
7/1 ARM – 4.250% Interest Rate, 4.710% APR
30yr FRM – 4.625% Interest Rate, 4.698% APR
* This estimate is informational only. It is not a commitment to lend. To apply for a loan, you’ll need to complete an application and provide additional information. Final approval of your loan is based on verification of your meeting the necessary underwriting criteria and property approval. The estimates for fees and other charges are not intended to be accurate until you have chosen a property and settlement service providers. Rates are estimates. Your final rate, loan product, and terms may be different. Normal credit qualifications and other terms and conditions apply. Products, rates and terms are subject to change unless product has been selected and rate has been locked after you have chosen a property.