Bay Area Mortgage Rates Trend Downward After Obama Election Victory… Will It Continue?

Bay Area mortgage rates trended downward sharply after the Obama victory last week along with a stock market that completely tanked.

What influences these kind of swings in that markets?

Financial worries in Europe, the “Fiscal Cliff” and in general investors tend to be a bit more partial and have more confidence when their is a Republican in office, history shows…

Rates Improve After Obama Victory

Two major factors influenced mortgage rates this week. President Obama won the election, and concerns about Europe increased. As a result, mortgage rates ended the week lower.

The theory was that an Obama victory would be positive for bonds and negative for stocks, and this was in fact the reaction in financial markets. Obama supports keeping Fed Chief Bernanke’s bond-buying policy in place, which is very favorable for bonds. In addition,

Obama was considered less business friendly than Romney, and that, along with the risk of higher taxes on dividends and capital gains, caused investors to sell stocks and buy bonds.

Nearly all of the news out of Europe was negative this week. European Union (EU) forecasts for economic growth for the next two years were downgraded more than expected, and EU officials warned of greater downside risks. German economic growth data fell short of consensus forecasts.

Greek leaders passed a series of austerity measures required to receive additional aid, but widespread riots and protests took place during the vote. Concerns about Europe cause investors to shift funds to safer assets, including US mortgage-backed securities (MBS).

What will Bay Area Mortgage Rates trend toward in the following weeks as the market digest the reality of the next four year?  We shall wait and see.