Perhaps taking a breather after a four-week slide, mortgage rates were down across the board last week – meaning that mortgage rates basically remain at historic lows and that homebuyers get another crack at buying a new home for a good, low interest rate.
According to lending giant Freddie Mac (Stock Quote: FRE) mortgage rates reached an eight-month high last week, only to fall again. One major reason why rates fell was the news on Friday that Goldman Sachs (Stock Quote: GS) was being investigated for civil fraud charges by the U.S. Securities and Exchange Commission.
We’ll let the economists debate the merits of the case, but for now, a blockbuster charge against one of the few remaining Wall Street giants could trigger a “flight to safety” as investors once again abandon the stock market for the relative shelter of the bond market, mostly because there is no assurance that the SEC isn’t about to drop another bombshell on the stock market.
The stock market was fragile enough with talk of regulatory reform on Wall Street over the last month. Add to the mix a huge, headline-grabbing investigation of Goldman Sachs, and many investors may decide it’s time to come in out of the rain and seek safety in the bond market. To experienced investors, anytime government lawyers descend on the concrete canyons of lower Manhattan, the stock market usually takes at least a short-term hit.
Consequently, if more cash flows into the bond market, interest rates may go down, as lenders don’t have to compete as aggressively when the stock market is large and in charge.