January 13, 2015
Mortgage rates fell only modestly today, but it was enough for the best rate sheets since mid-May 2013. That’s a new 20 month low, on average.
Once again, there were no meaningful events on the economic calendar to motivate market movements. Instead, the bond markets that dictate mortgage rates were simply along for the ride as other sectors underwent more volatility. Like yesterday, this was most noticeable in equities markets (stocks). While rates won’t always be falling when stocks are falling, the bigger the movement becomes in one, the more likely the other will be affected. Today’s movement in stocks was big enough that bond markets couldn’t help but trade sympathetically.
Because of this, bond markets were near their best levels of the day in the afternoon when stocks hit their lows. This resulted in widespread positive reprices from mortgage lenders. As such, the average morning rate sheet wasn’t quite as strong as yesterday, but the average afternoon rate sheet is slightly stronger. CNBC has even caught on to the mortgage buzz. You can watch a great video report at their Debt site from Kellie Grant.
Rates have certainly been trending lower since the beginning of 2014. That trend has much to do with Europe, and until the trend in European economic concerns reverses, the trend in rates is likely to continue. The tricky part is that the reversal could begin at any time and we wouldn’t really be able to identify it without some hindsight. Coming up in the middle of the night tonight, Europe will get an important piece of news in the form of a court ruling that will speak to the European Central Bank’s ability to stimulate the economy as it sees fit. While it could just as easily result in very little drama, this is one of those periodic events that has the potential to cause current trends to accelerate or seemingly reverse course. That makes floating more risky in the short term.