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Stock Swoon Tanks Mortgage Rates

Friday, 7 May 2010 | 11:22 AM ET

For those of you who consider me far too 'glass is half empty,' here's a little bright side to the near 1000-point drop in the Dow yesterday: Investors fled to the 10 year Treasury, driving the yield way down and pulling down the rate on the 30-year fixed mortgage right along with it.

The yield came up a bit, but at one point yesterday you could get a 30-year fixed rate mortgage for 4.5 percent with no points. How's that for housing stimulus?? So was it just a blip on the radar? Not necessarily.

"More than anything, it means mortgage rates will stay close to the 5 percent mark a bit longer than was forecast a week or so ago," says Greg McBride of Bankrate.com. He admits it's probably a temporary blip, but "mortgage spreads are widening because bond investors are nervous about anything that doesn’t carry a U.S. government guarantee." If the situation in Greece were to become a global contagion, he adds, that could keep U.S. mortgage rates down.

We saw a big run up in mortgage purchase applications last week, toward the end of the home buyer tax credit, but refinances were down. This move in the 30-year could juice both those readings in next week's survey. Of course it's temporary, but so much of the housing market now is based on consumer confidence, so if this temporary blip eases the expected-falloff from the end of the tax credit, that would be an unexpected bonus.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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