This is a YouTube video titled "SVB and Mortgage Rates #homeloans #homebuyer #interestrates #fhaloan #firsttimehomebuyertips" containing a monologue explaining the relationship between inflation and mortgage rates, using the collapse of Silicon Valley Bank as an example. The speaker discusses how inflation impacts mortgage-backed securities and predicts future trends in mortgage rates. The content was created on March 15, 2023.
The recent collapse of Silicon Valley bank is a perfect example of how inflation is the enemy of mortgage rates. Silicon Valley bank, like many banks and lenders, purchased a bunch of mortgage backed securities as part of their investment portfolio. These are mortgages after they close. But the last couple years they're buying those mortgages at 4 and 5% rate of return because it was 4 and 5% interest rates. Now they plan just like any investor for about a 2% year over year inflation. So about 2% burn on their investment, no returns. However, when inflation's been 6% plus for quite some time, that's really eating into the return on their investments. They can't go back and fix those bad deals that they have with a 4 and 5% rates. But what they can do is going forward offer 6 and 7% interest rates, which is why mortgage rates have increased for any investor out there. But when inflation goes down, mortgage rates go down. They don't have to charge that extra premium. So that's the correlation between inflation and mortgage rates. We do predict inflation to go down soon and mortgage rates should follow.
