Mortgage Rates Lower on Stock Sell-Offs

Mortgage Rates Lower on Stock Sell-Offs

Nov 15th, 2012

Mortgage rates fell this week, nearing the record low the weekly survey set at the beginning of October.  If you’re in the market for a mortgage right now, you can thank stock traders for serving up lower mortgage rates this week. Since cresting at 13,600 last month, the Dow Jones industrial average has tumbled more than 900 points.

Your retirement account might be worse for the wear, but there’s nothing like a good stock sell-off to hammer mortgage rates lower, says Kevin Cavin, senior vice president and mortgage strategist for Sterne Agee, a brokerage firm based in Birmingham, Ala.

 “Growth is not expected to be high, and we’ve got this fiscal cliff issue, which creates a lot of uncertainty among the investor base, so they want to remain in very high-quality, safe investments, and that tends to be government bonds,” Cavin says.

As demand for government bonds picks up, prices rise and rates fall. And because mortgage rates track government bonds, particularly 10-year Treasuries, closely, that’s driving mortgage rates lower, Cavin says.


 30-year Conventional:         

3.54% — with avg. points: 0.39 pts

 15-year Conventional:         

2.87% — with avg. points: 0.39 pts                                                                                          

 30-year FHA:          

3.45% — with avg. points: 0.39 pts

 5-year Conventional ARM:           

2.72% — with avg. points: 0.39 pts

 30 Year Fixed Trend Over Last 3 Months

 30 year fixed rate mortgage – 3 month trend



 Date           Conventional            FHA                VA          

11/16          Lower            Slightly Lower    Slightly Lower   

      ·         10 Year Treasury Yield opened at 1.59

 11/15          Unchanged    Slightly Lower    Slightly Lower   

      ·         10 Year Treasury Yield closed at 1.59

 11/14          Slightly Higher       Higher              Higher   

      ·         10 Year Treasury Yield closed at 1.59

 11/13          Unchanged       Unchanged        Unchanged        

      ·         10 Year Treasury Yield closed at 1.59

 11/12          Slightly Higher  Slightly Higher  Slightly Higher   

      ·         10 Year Treasury Yield closed at 1.61

 11/09          Slightly Lower    Unchanged        Unchanged        

      ·         10 Year Treasury Yield closed at 1.61


Nov 15th, 2012

 Will rates rise or remain relatively unchanged this week?

Industry experts and analysts provide their insights.


·       25% of respondents expect rates to fall in the coming weeks 


·       33% predict a further increase in mortgage rates while the remaining 


·       42% forecast that mortgage rates will remain more or less unchanged

 Last week in review (November 5 – 9, 2012)

Now that the elections are over, one of the biggest questions facing our economy is what will happen as we approach the “fiscal cliff.” Read on to learn what this is about, and what it could mean for home loan rates.
Table source: Mortgage Success Source

Last week, President Obama was re-elected to a second term in office and the market’s position is that the Fed will continue its latest round of bond buying (known as Quantitative Easing or QE3) until the labor market and economy improve significantly. While recent Jobs Reports have shown modest improvement in the labor market, it is still a fragile area of our economy. For instance, September’s Job Openings and Labor Turnover report (JOLTS) came in at its lowest reading since April. However, the number of job openings did increase by two percent from September of 2011, a positive sign for the labor market.  

With QE3 in process and the elections over, the word on Wall Street as we approach 2013 is “fiscal cliff.” What is the fiscal cliff and why is it significant? Essentially as we head into 2013, tax cuts for individuals and various tax breaks for businesses are due to expire, taxes pertaining to President Obama’s health care law will begin, spending cuts enacted by Congress as part of the debt ceiling deal of 2011 will go into effect, and long-term jobless benefits will expire. The Congressional Budget Office (CBO) estimates that if all of these items occur, it could take an estimated $600 billion out of the U.S. economy in 2013, pushing the country into a recession.

What does this mean for home loan rates? The issues surrounding the “fiscal cliff” will be talked about from now until the end of 2012 and that could mean a lot of market uncertainty, which typically results in investment dollars moving from stocks into bonds, thereby improving home loan rates (which are tied to mortgage bonds). In addition, continued concerns over the debt crisis in Europe and more turmoil in Greece will likely keep investors in the safe haven of our bond markets, which will also benefit home loan rates.

However, a big issue we need to continue to monitor is inflation. One of the goals of QE3 is actually to create inflation. And remember, inflation is has a negative effect on bonds (and therefore home loan rates) as it reduces the value of fixed investments like bonds. This is an important issue to watch in the weeks and months ahead. 

The bottom line is that now is a great time to consider a home purchase or refinance, as home loan rates remain near historic lows.

In the news this week (November 12 – 16, 2012)
Table Source: Mortgage Success Source

Speak Your Mind



© Copyright All Rights Reserved 2017
Zillow Trulia