The following is an excerpt from a recent email sent to a client. Hoping others find this helpful...
It's very hard to say what the mortgage rate is going to do but here are some general observations.
Inflation often leads to higher interest rates which generally lowers demand for stocks because businesses are less profitable when they pay more interest. When large (institutional) investors dump stocks they often buy bonds. Mortgages are sold as bonds (mortgage backed securities) regardless who originates your loan, though the originating lender may retain servicing as a separate profit center.
When the Dow & NASDAQ rise it's because stocks are in demand. The bond market goes down (bond demand drops) and they must give investors better incentives to purchase bonds. They offer higher rates of return to attract investors and raise the rates borrowers must pay on (mortgage) loans.
Track weekly conforming mortgage rates ( here )
Greg Zaccagni @ http://www.mortgageadvisor.info
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