Stock Drubbing Reinforces Low-rate Outlook

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Stocks have surged since March, but today, they lost some of their optimism. The S&P 500 dropped nearly 6%. Oil dropped 9% as well. Meanwhile, credit spreads have mostly returned to normal after a bit of panic in March. This is good news for mortgage shoppers, as shrinking credit spreads and declining bond yields usually mean lower fixed mortgage rates. One lender predicts increased adoption of reverse mortgages by September. There’s also concern about mortgage deferrals turning into defaults if the labor market continues to struggle.

Key Takeaways:

  • Fear in the markets forced stock prices down, and unless evidence of an effective vaccine emerge, the market isn’t predicted to go higher.
  • Bank-offered high-ratio 5-year fixed rate mortgages plunged to a low of 1.99% for the first time.
  • Reverse mortgage rates have recently fallen to the 3’s, so many are expecting those mortgages to be more widely adopted due to income losses from the pandemic.

“This is glad tidings for mortgage shoppers. When this spreads drops, it typically coincides with wider profit margins for mortgage lenders.”

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