U.S. Economy Showed Improvement & Rates Went Down?  Why…?

Mortgage markets improved last week as positive economic data was overshadowed by geopolitical strife. A flight-to-quality drove buy-side activity in mortgage bond markets, which, in turn, helped conforming rates fall across the state of Iowa.

Last week marks the first time this year that mortgage rates fell on a week-over-week basis, and considering why rates fell, it points to the fragile nature of the global economy.

By all accounts, last week showed that the U.S. economy is in recovery.  Even if you disagree, you can’t discount the news…

1. Housing data rises to its best levels in 8 months (LA Times)
2. Consumer sentiment hit a 7-month high (NPR)
3. Business investment increased 1.4% in December

Furthermore, the Federal Open Market Committee met last week and said that the economy continues to expand (although the pace is slower-than-optimal).

Normally, positive news like this would drive mortgage rates higher, and during the early part of the week, it did. But then, as political problems in Egypt grew larger, international investors began to move money from their more risky assets into the relative safety of the U.S. bond market.

This includes mortgage-backed bonds (naturally). The buyer influx pushed up prices and, because bond yields move opposite price, mortgage rates dropped.

The week ended with rates at their lowest levels of the week.  Remember though, timing is everything!

Specifically, What Did Those Reports Say?

Each week, I put up an economic calendar of news coming out that following week.   Here’s the what actually happened with those reports last week:

What Impacts Mortgage Rates?

If you’re looking to purchase or refinance a home, it’s important to know what moves mortgage rates.  There are normally two major things that impact the direction:

1. Economic News.  (Like the calendar above).
2. International News. (major events, pending legislation, war related news, etc).
3. Stock Market. (Money flows from equities (stocks) to bonds when it seeks shelter).

What Are Rates Based On?

It’s been mentioned before, but as a common reminder – mortgage rates are only based on one thing, Mortgage Backed Securities (MBS).  The only way you have access to these is through live bond quotes.

Looking For Mortgage Rates?

If you’re looking for specifically what mortgage rates are doing, I’d be happy to help with a custom rate quote.  Each scenario is different (there are 27 different factors a mortgage rate is determined by).  If you or someone you currently know are looking for a mortgage, I’m here to help!

Information without obligation.  That’s my policy.  If you like what you hear, my team and I would love to help you out with your mortgage!  Our contact information is on the top right hand side of this page!

Tagged as: Egypt, Jobs, Mortgage Rates