Mortgage rates fell last week after the collapse of the Turkish lira prompted financial market fears about the exposure of European banks to Turkish assets and raised questions about the potential for similar challenges in other emerging markets.
The developments in Turkey come at a normally quiet time of year in financial markets, amplifying their repercussions. U.S. bonds benefited from these financial market fears, which pushed mortgage rates to their lowest levels in a month. Mortgage rates have fluctuated in a relatively narrow 20 basis point band since the start of the summer, after moving sharply higher during the spring.
Aside from international developments, financial markets are likely to pay unusually close attention to housing market data due over the next week. While the American economy is generally doing well, recent housing data have shown very preliminary signs of sputtering. July home sales and home value appreciation numbers due next week could provide greater clarity on the health of the housing market and its broader implications. Weak numbers could put downward pressure on mortgage rates.