Your Mortgage: We can’t have our cake and eat it too

Mike Miles

By Mike Miles

Before I begin, can I address the headline to make sure we can all agree as to what it means? It seems backwards … the way we all say it. I believe it should be more like this … “you can’t eat your cake and have it too”. Why do I think this? Well, it’s because if you eat it, you can’t still have it right? But if you currently have the cake … technically you could eat it, but you wouldn’t have your cake after you ate it.

Yes, it’s okay for you to feel sorry for those that know me.

The point of this post title is how it relates to building wealth in the equities markets and also securing the lowest mortgage rates possible. Fundamentally, these pull in opposite directions. If the large equity indexes (S&P and the Dow) are performing well, long term rates (mortgage rates) will increase, resulting from a higher 10-year Treasury yield. If the equity markets are performing poorly, fundamentally the yield on treasury notes is dropping … allowing mortgage rates to drop as well. That is what is happening right now.

While I know there are savvy investors out there building wealth during a market correction (some economic experts are calling the recent drop in the stock market a correction), fundamentally speaking, most investors have lost a considerable percentage of value in their investment portfolios.

The good news though is that you can secure a mortgage rate today that’s probably .25 to .5 percent lower than it was for most of 2018. It’s been speculated that a market correction is the first signal we are about to enter into a recession. Some economic data may support that … consumer sentiment is projected to drop in January from December, jobless claims are projected to increase in January from December, industrial production is projected to drop in January from December … just to name a few.

As always though, the market changes are more to do with consumer/investor confidence. So when you see wild swings (as we’ve seen over the past month), it signals that there are things that either spook investors or motivate them. The current government shutdown is the longest ever … which certainly adds to the unrest. Maybe we are entering a recession. Maybe we are experiencing a market correction. Or, maybe the market is spooked with the current uncertainty of the government.

In any case, borrowers and homebuyers can certainly benefit with the recent drop in rates. They just may not get to also have their retirement accounts gaining in value too.

This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268