Lender411.com Articles Refinance

Link to this page Print RSS  

Well, here it is, the government has passed National Healthcare Reform and the new legislation will have a far reaching effect, including your mortgage.

WHAT???? How on earth will this impact my mortgage, that has nothing to do with Healthcare??

There are 2 reasons the Healthcare passage could affect your mortgage. 1st with the passage of healthcare reform, stock markets are going to resp0nd. Currently the stock market has reponded favorably and many health related stocks have seen nice improvements. Well typically when stocks are doing well, it means bonds are not performing as well. Since mortgage rates are tied to the performance of bond sales they will fluctuate with the movement of the stock market.

It works like this, when stocks are doing well, investors will pull their money out of bond to invest in the stock market. When the bonds go down, mortgage companies are not getting as much for their money, so in turn they will raise the interest rates to maintain their operating cost margin. Conversely, when the stock market is doing poorly, you will typically an increased demand for bonds and their value goes up; so the mortgage companies will pass some of that savings onto Borrwers in the form of lower interest rates.

So, as the kinks are worked out in the new healthcare bill, you will see many days of stock increases or decreases based on the decisions lawmakers agree upon. That is going to make the market very manic some days, with drastic ups and downs.

The 2nd way healthcare will affect your mortgage is through inflation. Regardless if you agree with healthcare reform or not, both sides will agree to the likelihood of inflation over the next few years. (I'm not saying Healthcare will be the sole reason for inflation, but it will be a part of it) Anytime the government spends money it eventually leads to inflation.

Why?? Lets use an example, say you had a rare gem, very few in the world and you looked to sell it. You should be able to sell it at a very high price because there not many around. Now if someone found 1 million of those same gems in a cave and put them all up for sale, would you still expect to receive the same value for your gem??? Of course not, because now there are a lot of them so that will drive the value down. The same is true for the dollar, when we are not running at a deficit and not spending trillions of dollars the value of the dollar is seen as strong and it will keep its value. once you saturate the market with phantom money, they will become devalued (much like bonds) and they have less purchase power. Investors and Retail Sales shops will need to raise their prices because your $100 isn't worth as much as it was before.

Link to this page Print RSS  

Page: 1 of 2

1

2