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The Stock Market and Mortgage Rates

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The carnage in global stock markets continues this morning with US stocks plunging after the Dow suffered its worse daily point loss ever in yesterday’s session (-1,190).

Stock Investors are seemingly rushing to the exits screaming, “get me out,” and this is typically a sign that we are closer to the bottom of the selloff.  One thing for sure-both stock rallies and stock selloffs get overblown. You never know where the bottom is until it is in the rear-view mirror. We shall see. It seems that the market, having gotten so high, was looking for an excuse to sell off. Take away this coronavirus factor and you have a different mood in the market. Historically, we all know this is temporary. Odds are we will look back and wish we were buyers in the market after this big drop. However, the selloff continues for now trying to gain footing.

A takeaway for us-the same can be said about rates. We will not know the bottom or low tick in rates, until rates tick up. Clients would be wise to capture this opportunity at hand, while it exists. Bottom line,  no one knows what the ramifications are of the coronavirus are-it is impossible to handicap at the moment. Even if the Fed steps in to lower the Federal Funds rate, that does not have a direct relation to mortgage rates, as the Fed Funds rate is a short term rate, and mortgage rates are already exceptionally low.

What history has taught us: We have mortgage rates that have matched their 50 year low reached in 2003 again.  IT IS A GREAT TIME TO TAKE ADVANTAGE OF THESE PHENOMENAL RATES. NO REASON TO BE PAYING MORE IN INTEREST THAN YOU NEED TO.  Especially since many loan programs have true “no cost” pricing options.  Consumers have a “bird in the hand” opportunity here now. No one talks about the fact that when lenders get busy, LIKE THEY ALL ARE NOW, that they slow down their pipelines by raising their pricing (meaning higher rates), which creates a “floor” to rates.  Hence, be careful if you are waiting and hoping for lower rates that could easily not materialize.

Hope this helps give you guidance moving forward.   Don’t hesitate to call or e-mail with any questions or if you would like a rate quote on your situation.