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Will the Falling Stock Market Affect Mortgage Rates?

Posted on | March 2, 2009 | No Comments

US-ECONOMY-NYSEEveryday we check our stock portfolios we see red, dark red.  To compound matters, we are ambushed with news headlines that read “the lowest levels for the stock market since 1996.”  Sometimes the truth hurts, but do we really need to see it on every single newspaper?  It is difficult to find many analysts or investors who think a bottom is near.  With all the doom and gloom swarming the investment community, will this affect mortgage rates?

Ultimately, the stock market and mortgage rates have no direct affect on each other.  The ways in which they do affect each other is financial market psychology.  If Americans see the stock porfolios dwindling, they feel that the economy is in trouble.  The idea that the stock market predicts the economy is drilled into Americans each and every day.  Well, if the market continues to fall, isn’t this a prediction of things to come.  If we feel the economy is going to get worse, isn’t it likely that the housing market will get worse too?

We know that as the housing market has crumbled, the government has done everything in their power to lower mortgage rates.  Lower mortgage rates “should” lure home buyers back into the housing market.  This is what government officials feel.  It does make sense that this would be the case, but even if rates were at 0%, that doesn’t mean Americans are making more money.

In essence, the falling stock market does affect mortgage rates.  As the market continues to fall, less money will circulate in our economy, less homes will be purchased and the government will take more action.  The action the government will take will be to lower mortgage rates even more in an effort to find a bottom in the housing market.  It is very difficult to call the bottom in any financial market, so it is advisable to get a lower mortgage rate while you can.

Mortgage rates are at historical lows and lenders are actually starting to lend.  Make sure to do some research, check out what your local lenders are offering and always make sure to read the fine print.  Do not get suckered into a deal where you have to pay an enormous amount in fees and closing costs.

Category: Mortgage Rates and the Stock Market

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