Thursday, May 13, 2010
The Street Vs The Home
With all the recent stock market volatility, you may be wondering what effect such events have on mortgage rates.
Well, when economic fears rise, as they did last week, investors flee the stock market and head toward safer U.S. Treasury bonds, like the benchmark 10-year bond.
As a result, yields for those bonds plummet because demand is strong and a higher yield isn’t necessary to lure investors.
And because the 30-year fixed tends to follow the direction of the 10-year bond yield, mortgage rates fell.
Last week, the stock market plummeted thanks to fears of major default in Europe, but after a bailout package was announced today, stocks surged higher.
Mortgage rates will also climb higher on the news, though they may stay lower longer thanks to the general uncertainty in the air.
This is good news for prospective homeowners, as mortgage rates were expected to keep climbing throughout the year while the economy improved.
As a rule of thumb, bad economic news pushes mortgage rates lower, while good economic news pushes mortgage rates higher.
Stocks move in much the same way, except of course higher stock prices are seen as a positive and higher mortgage rates are viewed quite unfavorably.
Keep in mind, however, that this is just one of many factors that determine mortgage rates, and a change in stock prices may not always indicate a similar change in rates.
Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.
Tel (631) 687-3510 Ext. 101
eFax Attn Gene Neal
Fax (631) 687-3513