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The stock market has enjoyed the decline with oil prices, but mortgage rates are moving up!


The recent decline in oil prices is good news for the equity markets, but mortgage loan rates are moving up quick.

The average consumer and today's home owner has to be quite puzzled when they try to figure out what direction mortgage rates are moving. This year has been a roller coaster ride for the stock market and mortgage rates. The rapid increase in oil prices threw the stock market into a deep period of extended losses as fears of inflation and the rapid increase of energy prices hampered the market. Mortgage rates followed suit, as the concerns over inflation led many investors to drive up the required yield on the bonds and help boost long term mortgage rates.

Recently the price of oil has dropped almost ten percent, but mortgage rates are continuing to move up. At first glance this appears illogical as there should be optimism that inflationary pressures will ease up. The challenge is that mortgage bonds are traded like every other security and the market structures the price on supply versus demand. The current market or demand for mortgage rates is down as investors feel more confidence that they will earn better returns in the stock market. Their optimism over the drop in oil prices helps boost their confidence to invest in stocks believing these investments are going to net a higher return. The market has been so volatile this year, it is hard to imagine that there will not be some pullbacks with mortgage rates as the market digests economic news and corporate earnings. Today's market is clearly all about timing as rates are likely to change just as fast as the weather.

7-22-2008 ? LoanNetwork.com





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