Better Mortgage Rates Result Of Today’s Stock Market Slide

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The huge decline in the stock market today could produce an unanticipated drop in mortgage rates and kick off a bout of home buying and refinancing. Stock market traders today overwhelming believe a Fed rate cut is coming as well.

Stock Market Beating Today Lead To Lower Rates

The Lehman Bros bankruptcy annoucement today combined with fearful talk about “who’s next” lead to investors fleeing the stock market in favor of the safer bond market. This lead to a 500 plus point drop in the Dow Jones Average and sent 30 fixed mortgage rates down about 0.125 percent. This rate drop doesn’t seem like a lot, but moving forward the prevaling sentiment is the Treasury market and the Fed are not done when it comes to lowering rates.

Reuters reports,

“Benchmark Treasury 10-year yields plunged by 0.26 percentage point to 3.45 percent, the lowest level since April. Yields on mortgage bonds dropped about 0.22 point to 5.02 percent. Both yields dropped further as the Dow Jones Industrial Average crumbled, ending down more than 500 points. Falling yields on Treasuries and the mortgage bonds issued by Fannie Mae and Freddie Mac will push the 30-year rate down toward 5.5 percent, Abraham said. That would reduce the rate on the most popular fixed-rate U.S. mortgage by a full percentage point from mid-July.”

Stock Market Traders Today Believe Fed Will Cut Rates

I noticed today the lender were having difficulty getting out price sheet on time and when they did a number of follow up improvements came out over the afternoon. This combined with the report on Bloomberg today 70% of stock market traders believe the Fed is going to lower interest rates at tomorrow’s meeting when on Friday only 20% believed the same.

It’s a little too early to say exactly how much mortgage rates will drop in the coming days, but I thing it’s safe to say, the market has taken a fundamental shift in that direction. So get ready to refinance and start watching the stock market and mortgage rates not just for today, but in the days to come.

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Good Luck!