Call it the domino effect: Due to global currency concerns, the U.S. stock market had a rough week. Investors lost confidence in several developing nations, including Argentina, Turkey, South Africa and China, causing currency values to drop and, consequently, U.S. stocks to tumble.
How does all this affect your mortgage? More so than you might realize. When stocks suffer, as a tradeoff money flows instead to the bond market. And when bond prices go up, home loan rates go down. Thus, mortgage rates got a little more attractive this week. See how it comes full circle?
What remains to be seen is how the Fed will decide to adjust its monthly purchases of bonds and treasuries; currently the government is buying $75 billion a month in mortgage bonds and treasuries, down from $85 billion a month last year. This stimulus program has helped jumpstart the housing market and keep mortgage rates at historic low levels.
The Fed is meeting next week to determine how much - and when - to taper its bond buying. Global concerns could very likely help keep mortgage rates low longer. How the markets could play out for the rest of the year, however, is anyone's guess.
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