Economic Impact on Mortgage Rates

The economic news calendar is normally responsible for moves like this - but with a super thin schedule of reports last week, it was everything else under the sun driving the action. First, Stocks had a terrific week overall - and investors that want to move money into the Stock market logically have to take that money out of somewhere, right? Guess where that somewhere was? Bonds. So the move of money out of Bonds and into Stocks caused Bond pricing and home loan rates to suffer. Though Stocks enjoyed a great week overall, buyers can be fickle, and a day or two of disappointing Stock earnings news drove midweek volatility, with some anxious buyers moving money right back out of Stocks and into Bonds.

In terms of volatility, it also didn't help matters much that Bond rating services like Standard & Poor's and Moody's announced the potential downgrade of Mortgage Bonds. Most big pools of Mortgage Bonds contain a small number of loans with "subprime" credit - and these loans are currently experiencing a higher rate of default. So if the pool is deemed riskier overall, investors will want a higher rate or yield to compensate them for the higher risk - so this news caused a bit more concern for the Bond market overall.