Good News for the Economy is Bad News for Mortgage Rates

Mortgage markets worsened last week as investors responded to a recovering global economy. Despite briefly touching their lowest levels since May, mortgage rates ended the week dramatically higher.

It’s the second straight week that rates soared on a Friday.

For several months, Wall Street has been in limbo; undecided whether the economy is truly showing signs of improvement. Negative news has tended to sink rates while positive news has tended to do the opposite.

Rates May Rise Sooner than Expected

Lately, investors have been in search of signals anywhere signals can be found.  Last week — sans hard-hitting economic data — those signals came from the worlds’ Central Banks.  

Shortly after Australia raised its interest rates by one-quarter percent, Fed Chairman Ben Bernanke suggested that the Fed may raise rates sooner than expected. Stock markets rallied on the news and mortgage bond markets tanked. 

When bond prices fall, rates go up.

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!

Tagged as: Ben Bernanke, wall street