Chris Simms, Certified Mortgage Planner, with Preferred Home Lending Powered by Pulaski Bank of St. Louis had this to say about the market:

Yesterday we saw the price of oil dip down below its 200 day moving average.  While this should have been good news for stocks, bonds, and mortgage backed securities, the European Union saw a contraction in their economy.  Because so many U.S. companies are tied to European markets, stocks lost quite a bit of momentum.  This negative reading on foreign markets shrinking and the cost of oil decreasing provided some good news for mortgage backed securities and the bond market. 

Why?  The cost of oil going down lowers the overall concern for inflation (cost of goods rising), because inflation is the kiss of death for bonds and mortgage backed securities.  This good news on oil makes the day for bond traders.  To add to it, weakness in the market pace requires investors to look for areas of safety for their investments.  Bonds and mortgage backed securities are considered safe havens for investments as they provide a set rate of return. 

Ok so bonds are doing better, what does this mean for mortage rates?  They are down.  right now we have the 30yr at 6.375% and the FHA 30yr at 6.125% on 30 day locks.  so rates have fallen. 

Will they remain lower?  That will depend on two factors.  One if the oil prices stay elow the 200 day moving average and what the the beige book report states this afternoon.  The beige book is the FOMC meeting notes from their last meeting which details out the state of the economy and the feelings each Fed press had on those numbers.  If traders like the comments from the beige book and oil stays low it will help to control prices.  The only other concern will be the demand from stocks.  If stocks pick up steam from the beige book because traders feel the economy is strengthening, then they could pull money from bonds.

So for now enjoy the lower rates.  I'll keep you posted.

Chris may be contacted for questions or comments by e-mail at csimms@pulaskibankstl.com or by phone at 314.229.4242.