Election Season Interest Rates

From early 2024, the news have been stating that the Federal Reserve is going to decrease rates four times before the end of the year.

While that has not happened yet,  the Federal Reserve has indicated that they would do one rate cut - which is yet to come.

The word on the street is that gasoline and rates always come down as we near the Election Date. 

Whatever the reason may be, wether the Feds are taking action or the Election Date is approaching, I am happy to report that since close to 2 weeks ago we have hit another trough in rates on their way up.

This means that even though the long term trend is still up, we have hit a low.

This low is about 1% less across the board on pretty much all loan programs.

To give you some examples:

• the W2 / Tax Return Loan which a couple of weeks ago was trending at 7.2% could today be obtained for about 6.125%.

• the bank statements, self-employed business owner loan which was trending at just over 8%, could now be gotten in the high 6s or low 7s, depending on your FICO score and other parameters.

• the investment property type loan, also called DSCR (Debt Service Coverage Ratio), formerly trending in the low 8s,  could now be as low as 6.625%

Nothing goes only up or only down. 

Trends follow a sawtooth pattern.

Now we are in one of the "valleys" or trough of the sawtooth pattern.

To give you an idea of the long term trend we are in at the moment, look at the graph at the bottom of this e-mail.

Economics work on a cycle.

When you look at the graph, you can see that since the year 2,000 rates have been steadily coming down.

You can also see that the period from 2021 to 2023 was the bottom and now the trend is straight up!  

When you focus inside, you will see a sawtooth pattern of peaks and valleys. 

We are now in one of the valleys.

How long would this last? no one knows for sure.

If the word on the street is accurate, this valley should carry over all the way to Election Day! Tuesday November 05 for 2024.

A loan takes on average 30 days to process since application date.

Preparation could be anywhere between 30 to 90 days, depending on whether we need to tackle credit and/or documentation issues.

In other words, assuming this valley will last until the end of October, if you start the process in early July 2024 you should be able to take advantage of it! 

Not everyone is in a position to take advantage of this opportunity but if you are, in my opinion you would be getting a deal that we would probably not see again for years to come!  

The reason for this statement is because of the cyclical nature of the economy: If it took us 21 years to get to the lowest rate and now we are starting toward the other side of the pendulum, think about it, how many years of up-trending rates until we reach a Peak, to then start to come back down again?

Even on an uptrend, people still need a place to live and business owners still need the proceeds from a refinance in order to invest in their businesses or projects and/or refinance expensive debt into a much lower rate.

Just to give you an idea: credit card debt that today sits at between 22% to 30% could be refinanced, as I write this, for as low as 8.75%.

In conclusion, until 30 days before Election Date (because it takes 30 days to process a loan) this could be a great break from these higher rates!

Thank you for reading these lines!

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