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Mortgage Rates Plummet as Result of Turkish Currency Crisis

Mortgage rates plummeted the past day because of the Turkish currency crisis. How can a currency crisis in another country cause U.S. mortgage rates to move lower you ask? The answer to that question is U.S. Treasuries.

The Turkish Lira fell by more than 18 percent against the U.S. Dollar on Friday to an all-time low, causing investors to seek the safety of U.S. Treasuries. As investors buy Treasuries, prices move higher and yields move lower. The decline in yields forced mortgage rates lower because lenders set mortgage rates based on 10 year Treasury yields.

Mortgage Rates Plummet Because of Turkish Currency CrisisAverage 30 year mortgage rates were at 4.59 percent on Friday morning. As of Saturday morning, 30 year mortgage rates were down 18 basis points or .18 percent, averaging 4.41 percent. The single day decline of almost 4 percent is the largest move lower this year.

The sharp decline in mortgage rates is a positive development because mortgage rates have been moving higher all year long. At the beginning of 2018, average 30 year mortgage rates were just under 4.00 percent.

Mortgage rates are moving higher this year because the Federal Reserve has been increasing the fed funds rate, which has forced Treasury yields higher. 10 year Treasury yields started 2018 at 2.46 percent and hit a 2018 high of 3.00 percent on August 1st. Yields closed at 2.87 percent on Friday.

Mortgage Rates Plummet

In addition to 30 year rates falling sharply, conforming 15 year rates and jumbo mortgage rates are also lower. Current mortgage rates on 15 year conforming loans are averaging 3.80 percent, down from an average rate of 3.95 percent on Friday.

Mortgage rates today on 30 year jumbo loans are currently averaging 4.53 percent, a decline from an average rate of 4.56 percent. 15 year jumbo mortgage rates are averaging 4.45 percent, down from an average rate of 4.57 percent on Friday.
Author: Brian McKay
August 14th, 2018