The Wall Street Journal reports that banks will recast mortgage loans. Thanks to Federal Reserve policy changes, it’s currently cheaper for banks to get loans than it has been for a while. The other effect of a reduced LIBOR rate seems to be lower mortgage rates. Rates have been declining for decades. Depending on when you opened a new mortgage in 2018, it would have been among the lowest rates historically available.
More Disposable Income = Growing Economy/Retail Investment
While there isn’t a direct correlation between mortgage rates and the overall stock market, the fixed cost of mortgages is money that is immediately not available to invest or spend. Lower rates, especially for the best-qualified buyers, can, therefore, equate to increased capital available for investment.
Mortgage-backed securities perform not just on the success of the loans, but also on the sale of new mortgages. Lower rates clearly equate to increased sales. All these factors can contribute to a more bullish market situation. MBG replicates “as closely as possible, the price and yield performance of the Barclays Capital U.S. MBS Index (the Index). The Index measures the performance of the United States Agency mortgage pass-through segment of the United States investment grade bond market.”
MBG is pushing toward its 3-month high.
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