One big change in the new tax code is in regard to property tax write offs. Homeowners will no longer be able to write off unlimited property taxes. Those items are now capped at $10,000. In addition, the mortgage interest deduction is now only applicable to the first $750,000 in mortgages, which has been lowered from the $1 million limit it was previously at. While these changes in the tax code itself won't necessarily have a direct impact on mortgage rates, the economic impact of this law could.
The Effect on Mortgage Rates
The new tax code cuts the corporate tax from 35% to 21%, which should spark economic development. With the increased funds now available, corporations could focus on expansion and hiring. This can lead to increased inflation, which could lead to higher mortgage rates. The tax rates for individuals have also slightly decreased, which could add to economic expansion when that extra money is spent. More money flowing through our economy could cause mortgage rates to rise.
Another factor that could directly affect mortgage rates is is the supply of bonds. Some estimates show an increase of hundreds of billions to $2 trillion to the federal deficit. That increased debt would be financed by selling more Treasury Bonds. While Treasury Bonds don't guide mortgage rates, mortgage-backed securities do. A bigger supply of bonds would dampen investor demand and, therefore, rates would need to rise to keep investors buying. Higher rates on mortgage-backed securities mean higher rates for consumer mortgages, as well.
While it's not expected for mortgage rates to spike overnight, a gradual increase is expected as we move further into 2018. If you're considering purchasing a home at the Lake of the Ozarks, now's the time to do so, before the rate increases begin. Call 573-746-7211 to discuss your home financing needs with a professional mortgage lender at the Lake of the Ozarks today!
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Senior Loan Officer
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Osage Beach, MO 65065
Cell: (573) 216-7258
**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.