07/28/2021
â¨Good Read Wednesdaysâ¨
âWhy the Stock Market Drop Could Helpâand HurtâHomebuyers
Thereâs no simple explanation why changes in the stock market lead to changes in mortgage rates.
Basically, when investors get spooked, they tend to pull money out of the more volatile stock market and put it in boring, but more stable, bonds offering lower returns. They also often look to mortgage-backed securities, aka mortgage bonds. When more folks are buying up bonds, prices go up.
When lenders make a mortgage, they typically donât want to keep it on their books because that means less money is available to make new loans. So they sell the loans, which are being bundled together into securities, in the secondary market.
Since mortgage rates are the inverse of bond prices, when bond prices are up, mortgage rates go down.
https://www.realtor.com/news/trends/why-stock-market-drop-could-help-and-hurt-homebuyers/
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