Mortgage rates had a wild ride today where we saw a swing of over 80 basis points as the international markets continue to have concerns about Greek debt. Fixed rate mortgage pricing is fully informed by yields on FNMA Mortgage bonds. In general- When lots of people are BUYING bonds, the associated yield can be lowered. As its the yield that is what attracts buyers.
When there is a lot of FEAR and DOUBT in a marketplace, bonds of all kinds become very attractive. But a bond is a promise to repay over a given time frame. I heard that certain Greek “treasury” (or the Greek equivalent of US treasury bonds) Bonds were showing a yield of over 20% at times yesterday. What this means is that nobody is buying the bonds out of fear that Greece will not be able to pay them back. That yield has to be VERY high to outweigh the perceived risk.
With these bond buyers shying away from Greek, and other European bonds, those dollars are coming to the US bond market, and there was a massive rally today. So with all of these buyers, the US bond yields do not have to be very high to attract buyers. So the yield goes down, and bingo-bango…
Fixed rate mortgages go down too.
Tracking these kinds of market movements for my clients is something that allows me to always participate in improved rates, while avoiding negative rate changes.
Here is a LINK to a short video that explains my service in greater detail.