Mortgage Rates Push Into New 2014 Lows

Mortgage rates continued a strong move lower today, benefiting from a global sell-off in risk-related assets.  What’s a risk-related asset?  In this case, it’s a catch-all term for investments that carry greater risk and greater reward, such as stocks and emerging market currencies.  When risk-assets get trounced, bond markets are often one of the safe-haven beneficiaries, and stronger bond markets mean lower mortgage rates.

In the current case, and indeed in most cases where there is a large tidal exchange across the risk spectrum, mortgage rates aren’t able to fall as quickly as more direct beneficiaries like Treasuries.  Still, they’re falling.  Most of the improvement has been in the form of lower closing costs for the same interest rates quoted yesterday, but some borrowers may be an eighth of a point lower today.  4.5% remains the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution), but 4.375% is VERY close at several lenders.  When adjusted for day to day changes in closing costs, rates fell an equivalent of 0.03-0.04% today.

While unexpected, the improvement in rates is certainly welcome.  The question is whether or not it will carry over into next week.  The other question is how much markets will even be concerned with what had been shaping up to be a big FOMC Announcement on Wednesday.  If global markets continue in this same vein next week, the momentum could easily overshadow the Fed.  The counterpoint and the risk is that such episodes of global risk-aversion and emerging market panic are not uncommon.  They happen a few times a year.  Sometimes the Eurozone crisis happens and sometimes things blow over.  On the occasions where things blow over, rates tend to snap back higher fairly quickly.