Everyone has heard about the recent events in Europe, as Greece voted against a set of reforms from the Eurozone creditors. Most wouldn’t think this affects mortgage rates in the US, but indeed it does.
Mortgage rates dropped with more confidence the past few days in response to the weekend events in Europe. How does this translate to our market? Well, the whole debacle between Greece and the rest of europe creates a lot of uncertainty for investors in markets across the globe. With uncertainty comes lack of risk, which brings more decisions based on safer investments such as bonds. In response, US Treasuries and mortgage-backed securities faced a higher demand the past few days, which means higher bond prices and lower rates.
With this being a highly uncertain time for global markets, we will continue to see this trend. Only when the global economy starts to rebuild and rise will we see rates start to rise. This is why in April we saw rates at an all-time-low with European Quantitative Easing.
European events such as these will continue to have a strong effect on the biggest market moving considerations. Although there are much larger events that could affect the market, the Greece delima and other like cases will always have a short term effect like this.
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