The stock market’s shaky foundation led to a decline in mortgage interest rates last week, as investors fled equities in favor of less risky investments, like U.S. Treasuries and bond mutual funds.
There’s a palpable sense of fear in the stock market, fueled by widespread concern that talk of an economic recovery was just that — talk. The Dow Jones Industrial Average lost more than 500 points from Jan. 20-22 and 4.1% of its overall value in just one week.
It’s almost as if the stock market was looking for a reason to correct, and it might have found it in the form of aggressive statements from President Obama about reforming big banks. Those reforms could include limiting the size of banks and restricting their trading and asset risk-taking strategies. Financial stocks suffered as a result, and a Friday report of “unexpected” job losses in the weekly U.S. unemployment filings only poured more gasoline on the fire.
We’ve said it before and we will say it again. When confidence in the economy ebbs, and a 500-point decline in the stock market is a good sign of that syndrome, the fixed-income market usually picks up some of the slack. But as bond prices rise, there’s less incentive from financial lenders to hike interest rates to draw customers. Consequently, interest rates, including mortgages, tend to fall as they have this week.
With those thoughts in mind, here are the mortgage numbers from last week, as measured by the BankingMyWay Weekly Mortgage Rate Tracker:
Description This Week Last Week
One-Year ARM 4.14% 4.78%
Three-Year ARM 4.51% 4.60%
Five-Year ARM 4.28% 4.41%
15-Year Mortgage 4.55% 4.60%
30-Year Mortgage 5.12% 5.15%