Mortgage rates have now reached the “breaking point”; Investors should watch out for this major market risk – Ted Oakley

Mortgage rates are at their highest since 2020, with 30-year mortgages at 4%. This is compared to last year where the 30 year was down 2.8%. “The consumer is going to be under pressure, and we’ve already seen mortgage applications drop in recent months. That’s what’s happening in the market,” said Ted Oakley, founder of Oxbow Advisors. “I suspect the 4% rate on the 30-year mortgage is a breaking point.”

Oakley discussed mortgages and interest rates, as well as markets with Kitco News anchor David Lin.

Oakley gave the example of a consumer taking out a $400,000 mortgage today. “It will go up 20% from a year ago on the payment. If the payment goes up 20% and the house goes up 20%, all of a sudden we’re getting into this territory that you’re locked into “, he explained. . “So you have a situation where the Fed will probably raise rates in a slowing economy, which it always does, because it always lags behind.”

The consumer will be significantly impacted, as they will have higher mortgage payments, and we don’t have Fed stimulus like we had last year,” Oakley noted. “All the business people who sell houses or cars or whatever, they say, are what consumers care about, and those payments go up,” he said.

Oakley continued to talk about possible interest rate hikes and inflation. “You can’t quite believe the Fed because they’re always behind in everything they do. When they finally raise rates in a slowing economy and then all of a sudden peak oil, that’s a tax on the 50 to 60 percent of people who live paycheck to paycheck,” Oakley pointed out.

“We will see the economic downturn not necessarily going away, and inflation going down as well, and both will impact the markets,” he continued. “The current inflation rate is 7.5%, but it could go down to 1 or 2%. But it will definitely come back to 3% before this is all over, because the economy simply could not tolerate.”

Speaking of equity investments, Oakley suggested investors make sure they have enough cash for new opportunities “If you don’t have cash and you find yourself in a situation where things are really attractive , you have a real opportunity, but you can’t take advantage of it, ”he explained.

Oakley expects the economic slowdown to spark fears in stock markets. “I think what happens is selling begets selling. Every time the market sells 10%, and all of a sudden it comes back a bit, investors like the idea of ​​buying in drop case,” he said. “But there’s a place here, and we think that’s this year that buying down won’t work anymore, at least not in the short term, but maybe in the long term. We think we’re going to get to a normalization where you want to put more money to work, you must have more than 10% sales.”

To learn more about mortgage rates, interest rates and the markets, please watch the full video above.

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