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Mortgage Rates Are Headed Higher AND Lower — Quickly

October 1, 2008 by Scott Kinne

Monday, after the House of Representatives defeated the Emergency Economic Stabilization Bill of 2008, the stock market fell in historic fashion.

The Dow Jones Industrial Average closed down 777.68 points, its largest one-day point loss ever.

By Tuesday, however, optimism had returned to Wall Street.

Assuming that the bill would pass in some form, investors poured back into the stock market, driving prices up. Again, in historic fashion — Tuesday’s gains were the third-largest on record.

The stock market activity is highly relevant to mortgage rates right now because when investors flee the stock market, they’re often parking their money in bonds.

In general, that causes mortgage rates to fall.

But, by contrast, when investors regain their appetite for stocks, as they did Tuesday, they move back into the market, “unparking” their bond money. This causes mortgage rates to rise.

Both Monday’s and Tuesday’s dramatic action points to the speed at which market conditions can change, taking mortgage rates with them. Wall Street’s back-and-forth mentality has been one of the reasons why mortgage rates have bounced so wildly since July.

We can’t predict if rates will fall or rise going forward, but if the stock market is any sort of a clue, in whichever direction rates go, they’re going to go there quickly.

Filed Under: Uncategorized

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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