Mortgage Rates Back Near Recent Lows as Stocks Slide

Mortgage Rates Back Near Recent Lows as Stocks Slide

Mortgage rates moved noticeably lower today, getting the average lender back in line with some of last week's best levels.  For most, that means conventional 30yr fixed rates of 3.875% when it comes to top tier scenarios, but some lenders remain at 4.0%.  Many borrowers will still be seeing the same rates compared to Friday, with the gains being seen in the form of lower closing costs or higher lender credit.  There have only been a handful of better days for rates since early May 2015.

Today's strength came courtesy of broader economic weakness--or fear of weakness.  Mortgage rates are highly correlated with bond yields such as longer term US Treasuries (like the 10yr note) because the mortgage-backed-securities (MBS) that dictate rates tend to offer investors many of the same benefits/features.  MBS and Treasuries are both part of the broader 'bond market.'  There's an age-old cliche in financial markets that bond yields and stocks tend to move in the same direction. 

Of course, much of the QE era taught us just how UNtrue that can be, depending on the current events.  But there is still something to be said for the concept of investors moving away from riskier assets and into more 'safe-haven' type assets.  This was the case today as investors sold stocks and bought bonds.  More buying demand in bonds causes their prices to rise and yields (or "rates") to fall.