The Stock Market and Mortgage Rates

Mortgage rates are based on mortgage backed securities. When the stock market goes down, mortgage rates tend to improve (or at least not decline) as investors seek the safety of bonds over the quicker profits potentially found in stocks. And when the stock market is rallying, mortgage rates tend to go up as investors seek a higher return from stocks.

When unemployment is higher, the Fed buys mortgage backed securities to keep rates lower.

By keeping mortgage rates low, the housing market is improved by making mortgages more affordable. This encourages home purchases and also helps Americans reduce their existing mortgage payments by hundreds of dollars each month, which puts more cash back into their pockets and the economy.