(ZEROHEDGE) – It appears the laws of supply and demand have once again miraculously re-appeared – this time in the home mortgage market.
The average rate for a 30-year loan plunged to 5.3%, the lowest in a month and down from 5.7% last week. That is the largest weekly drop (40bps) since the Lehman collapse in 2008. Judging by the total collapse in mortgage applications, it is clear that as the ‘price’ of loans rose (rates) then the ‘demand’ for loans evaporated. Simply put, if you were writing mortgages at such high rates (amid near record low levels of affordability) you are doing no business at all.
So you lower the price of the loan (rates) to encourage demand. With the 40bps crash in rates this week, it appears the fecal matter really hit the rotating object in the mortgage providers.
