Home Buyers Outlook: What Does the Stock Market Mean For Interest Rates?

The headlines for the past week have been about the stock market’s ups and downs. The “downs” have been much more prevalent than the “ups”, as the world tries to figure out just how bad things are in China, the world’s second largest economy.

While the extreme volatility in the international stock markets will likely continue, the effect it will have on mortgage interest rates seems to be minimal. Typically, when the US stock prices have big declines we experience corresponding declines in mortgage rates. However, as stock prices plummeted over the past week, mortgage rates have seen relatively little movement. Some analysts attribute this phenomenon to the selling of US Treasuries by the Chinese which has kept bond prices in check while the stock market fell rapidly.

While China is experiencing a slowdown, the US economy seems to be holding steady. In fact, the GDP for the 2nd quarter was just revised to 3.7% which indicates a strengthening economy. So for now, don’t expect to see any large decrease in mortgage rates. In fact, most analysts believe that rates will continue to slowly rise in the foreseeable future.

If you are in the market to buy a home, it appears that now is a good time to make that happen. The current affordability factors and historically low interest rates make it a strong environment for homebuyers.

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