Sentiment Remains High – THE NEWS STAND

After a couple of weeks with relatively little net change, mortgage rates ended this week a little lower

On Thursday, President Trump said to expect an announcement about tax cuts in two to three weeks. Mortgage rates moved a little higher after the comment. There are a couple of reasons why tax cuts are viewed as negative for mortgage rates. The first is that tax cuts increase the wealth of the affected individuals or businesses. As they spend some of this money, it boosts economic activity, which in turn raises the outlook for future inflation. The second reason is that tax cuts increase the budget deficit, at least initially. This means that the government has to issue more Treasury bonds to fund the deficit. The added supply reduces the value of bonds, including MBS.

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