Dow Plunges and Mortgage Rates Rise

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Real Estate Agent with Berkshire Hathaway Home Services 00898298

THE CORRELATION BETWEEN MORTGAGE RATES & THE STOCK MARKET

There is not a tangible relationship between mortgage rates and the stock market whereby one can be said to directly drive the other. Although they both respond to the same market conditions, their response is difficult to predict. That said, there are some notable patters by which either mortgage rates or the stock market suggest the behavior of the other. These patterns are based on flows of investment money, as well as the larger economic impact of either a healthy stock market or low mortgage rates.

Economics of a Vibrant Real Estate Market

Low interest rates help to spur the housing market. Housing is a major factor in boosting a healthy economy. This in turn supports a rising stock market. So while in the short term a falling stock market can drive down interest rates from a macro-economic perspective, those low rates should eventually under gird a stock market rise. This theory was the logic behind the Federal Reserve’s QE activity of the last few years. Some economists fear that as the Fed winds down this program, rising mortgage rates will derail the stock market rally.

Based on what's taken place recently in the stock market it's anyone's guess what will happen next. The DOW has dropped over 2000 points, and interest rates are up. Source for Mortgage Rates Bankrate.com 2.9.2018:

30 Year Fixed: Rate: 4.33%     15 Year Fixed: Rate: 3.66%

Jumbo 30 Year Fixed: Rate: 4.64% 5/1

Adjustable: Rate: 4.12%    5/1 Jumbo Adjustable: Rate: 3.82%

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Mark Danforth Lomas

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Emily Medvec Qualifying Broker
Hello Realty Partners - Santa Fe, NM
Realtor | Serving Santa Fe & Northern NM

A 15 year fixed rate today of 3.66 is not an issue. Both the real estate market and the stock market are different markets. The stock market is most likely reacting to the positive jobs report and increased wages. And of the course the Fed's statement the cost of borrowing money (interest rates) would go up. At the same time it appears the economy is good and improving. With a 15 year rate of 3.66, no one should be afraid of buying a home!

Feb 09, 2018 11:44 AM #1
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