Mortgage rates fell modestly to begin the week following several weaker-than-expected economic reports. Economic data affects rates by motivating investors to seek out or avoid risk. In general, stronger data increases risk tolerance, and weaker data increases the demand for safer investments such as Treasuries and Mortgage-Backed-Securities (MBS), which dictate mortgage rates. Higher demand means higher prices and lower rates, all things being equal.
In the bigger picture, however, today’s gains were modest, and keep market levels in a sort of holding patternthey’ve been in for 4 days now. It’s not uncommon to see this happen leading up to a big-ticket event like theFOMC (“The Fed”) Announcement coming up on Wednesday. Investors are looking for clarity on the Fed’s plans regarding raising rates, among other things. It’s worth noting that the Fed Funds Rate isn’t directly related to 30yr fixed mortgage rates, but it would still likely be negative for rates in general, simply because it implies a willingness on the part of the Fed to dial back other accommodation. That “other” category includes policy that is currently benefiting mortgage rates–specifically, the ongoing reinvestment of Fed MBS income back into the MBS market.