July 17, 2014
Mortgage rates moved more decisively lower today, though not for any stable or happy reasons. Such is often the case with interest rates. As economic conditions worsen or as terrible events around the world fuel demand for bonds, prices of those bonds rise, causing rates to drop. This was the case today for US Treasuries as geopolitical events rocked markets. Mortgage-backed-securities (the bonds most directly responsible for mortgage rates) tend to move in the same direction as Treasuries. Today was no different, but with geopolitical headlines moving markets, Treasuries get more of the benefit because they’re a more readily available “safe-haven” asset.
The events in question include the shooting down of a Malaysian airliner near the Ukraine/Russia border as well as the inception of an Israeli ground-based assault on Gaza. There were other considerations in play today, but these were the biggest. The net effect was strong and steady improvement in bond markets and several instances of mortgage lenders revising rate sheets lower during the day. The gains leave 4.125% as the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios. The ability for rates to remain this low or move lower is limited only by the geopolitical strife to continue escalating. Once it stagnates or improves, rates are likely to snap back higher. Even then, we have yet to see a move outside the 2-month range.