A new housing estate along a channel near the Mokelumn River was viewed on May 22, 2023 near Stockton, California.
George Rose | Getty pictures
The mortgage interest rates are increasing strongly this week because investors sell US finance ministries at a quick pace. The mortgage lenses follow the return of the 10-year Ministry of Finance. Some speculates abroad could drop US state bonds as a retaliation measure against President Donald Trump's comprehensive tariff plan.
But there is another, even greater concern for mortgage investors and the most important spring apartment market. What if China, one of the largest owners of the agency or MBS, decides to sell these participations in response to US trade policy? And what if other countries follow?
“If China wanted to hit us hard, they could unload the treasures. Is that a threat? Sure,” said Guy Cecala, CEO of Inside Mortgage Finance. “You will look at to push lever and put pressure on … … it's a strong driver of something like that.”
At the end of January, the US MBS abroad had 1.32 trillion dollars or 15% of the outstanding overall outstanding, according to Ginnie Mae. The top owners: Japan, China, Taiwan and Canada.
China had already sold some USMBs last year, with the lands of the country decreased by 8.7% by 20% by the previous year and at the beginning of December. Japan, which showed to win in his MBS in September in September, showed a decline at the beginning of December.
If China and Japan continued to accelerate these sales and follow other nations, the mortgage interest rates would increase even more than now.
“I think the concern is on the radar screens of the people and as a potential source of friction,” said Eric Hagen, mortgage and special financial analyst at BIG. “Most investors are concerned that the mortgage spreads would expand a retaliation in response to China, Japan or Canada.”
Extensive spreads mean higher mortgage lenses. The spring real estate market is already in the middle of high real estate prices and weakens consumer confidence. In view of the latest IPO, potential buyers are increasingly concerned about their savings and work. A current Redfin survey showed that 1 out of 5 potential buyers sell shares to finance their down payments.
According to Hagen, the sale of MBS could continue to scare the mortgage market by foreign companies.
“The lack of visibility for how much they could sell and how they could be inflicted on the sale, I think that the investor would scare,” he said.
In order to reinforce the pain, the US Federal Reserve, which is a great owner of MBS, is currently leaving the MBS from its own portfolio to reduce its balance sheet. In other times of the financial crisis, the Fed bought MBS, like during pandemic, to keep interest rates low.
“This is a source of potential pressure on this entire conversation,” added Hagen.