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Mortgage rates made substantial gains yesterday as financial markets made an excellent flight to safety. This involves selling risky assets such as stocks and buying fixed income assets such as bonds. When investors buy bonds, it puts pressure on interest rates, all other things being equal.
The flight-to-safety began late last week with the second largest bank failure in history. Its persistence made sense in light of the third largest bank failure over the weekend. Monday came and went without the fourth or fifth biggest bank failures in history, so halfway through the day the panic started to subside.
It has been more even on Tuesday and brings the average lenders’ 30-year fixed rates back in line with Friday’s levels for conventional. It is still much lower than Thursday’s, but there is a risk of additional upside if panic continues to subside.
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