Will VA Loan Rates Recede?

It’s difficult to consider today’s VALoansMN rates without revisiting our past writings as we urged veterans to take advantage of our historic low rates. Remember just a few years ago when a mortgage loan was offered at 3% or lower? Those days are long gone but there may be a sliver of silver in these gray economic clouds.

VA loan rates are now well into the 7% range and bumping into the 8s. These rates are fueled by the inflation brought about by the flood of cash flowing into the economy. What was labeled the “inflation reduction act” did just the opposite according to many economists. The challenge before us now is easing that inflation without driving us straight into a recession. That is the dark cloud now hovering above the economic horizon. So where is that silver lining mentioned above? 

If history can draw a road map of what happens if the economy heads south then we may see some rate reductions in the future.*. Current economic conditions are having a double whammy on the real estate market.

1. Higher rates increase monthly payments
2. Current homeowners are reluctant to give up a current low rate mortgage to finance a new home at higher rates thus curtailing inventory of houses for sale.

To stimulate home buying one of two things (or both) may have to happen. Home prices will decline or mortgage interest rates would come down to stimulate growth. We at VALoansMN are confident we can help veterans have the home they deserve. We work tirelessly every day to help you find affordable solutions.

*For details on recessions and declining rates see this from the St. Louis Fed (https://fred.stlouisfed.org/series/FEDFUNDS)