Mortgage interest rates fell about 1/2% in the week following the Washington $700 billion bailout plan’s passing. Mortgage rates fell from about 6.0% to about 5.5% this past week on 30 year fixed qualifying mortgage loans.
The Washington bailout bill that passed last week was not directly tied to mortgage interest rates. However, the fixed mortgage rates were indirectly impacted as the direction of their movement was down. When the stock markets fell on Wall Street this week, it caused money to flow from stocks to bonds. Morgage interest rates are directly affected by bond prices. This inflow of money into bonds is what caused mortgage rates to fall about 1/2% this week.
The near-term direction of mortgage interest rates will likely continue to rely heavily on the direction that stock prices take during this financial crisis in the U.S.
The drop in the Federal Reserve’s short-term interest rates by 1/2% on October 8th had little impact on mortgage rates. This is because short-term rates are independent from long-term mortgage rates. Fixed mortgage interest rates are considered long-term rates and their movement is primarily directed by the movements in the bond market.
Nick Severtsen, Summit Mortgage – nick@nicksivertsen.com
