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How The Stock Market Rally Changed Mortgage Pricing For The Worse

August 30, 2007 by Scott Kinne

Mortgage rates unexpectedly increased yesterday afternoon as the U.S. stock market staged a late rally.

By the end of the day, the Dow Jones Industrial Average was up 1.9 percent, or 247.77 points.

This is a typical pattern.

When stocks are moving higher, investors want to ride the wave and look for sources of cash. Often, bonds serve as that source.

Now, remember that mortgage rates are based on the price of mortgage bonds. When bond are in demand, bond prices increase and the associated rates fall. When bond are being sold — as what happened yesterday — prices decrease and that pushes mortgage rates higher.

That’s what happened yesterday.

As the DJIA added 150 points in the last two hours of trading, mortgage rates rapidly worsened. If you locked your rate in the afternoon, it may have been markedly worse than if you locked in the morning.

Mortgage rates are expected to be at least 0.125% worse when the markets open this morning.

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Scott Kinne

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Vice President, Senior Loan Officer
NMLS ID #182351
Office: 703.293.6146
Mobile: 571.237.6241
Fax: 571.317.2478
skinne@fhmtg.com

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