Weekly Mortgage Market Report

This week, uncertainty about the pace of the economic recovery caused investors to shift to relatively safer assets, including government insured mortgage-backed securities (MBS). Also positive for mortgage markets, the economic data released this week showed that inflation remains extremely low. As a result, mortgage rates declined during the week, reaching the lowest levels of the year.

Concern about the level of global economic growth drove financial markets this week. Troubled European countries will be forced to reduce government spending, and Chinese officials indicated that they will tighten monetary policy to reduce inflation. In the US, it's not clear to what degree the new financial regulation bill will cause banks to reduce lending, leading to slower economic growth. In response to periods of uncertainty such as this, investors seek to reduce risk by moving to safer assets such as bonds, and greater demand for MBS pushes mortgage rates lower.