The More Drama In the Market, The Lower Mortgage Interest Rates Fall

The past ten days have seen unprecedented swings in the Dow Jones average. Europe seems on the brink. French banks totter. France’s credit rating is threatened. The United States has been downgraded.

So where is money flowing in a flight to safety? Into U.S. Treasury bonds. As these bonds increase in price, their yields fall. U.S. Treasury bond yields are the single most important predictor for mortgage interest rates. Hence such rates are at record lows.

Report: With the exception of the five-year adjustable rate mortgage — usually the most stable of the ARM family — all other rate categories are in freefall. One- and three-year adjustable rate mortgages have swung wildly, and are now in a solid downward trajectory, with the one-year version dropping by a whopping 580 basis points and the three-year ARM falling by almost 300 basis points.

That makes those adjustable-rate loans much cheaper, but note this: ARMs include the term “adjustable” for a good reason. They reset or adjust at the one-year or three-year mark, and that reset could push your mortgage rate up if the economists are correct and interest will be rising soon.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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