As of yesterday, it looked like mortgage rates would be more interested in staying in a narrow, sideways range for the holiday-shortened Spring Break/Good Friday trading week.  Today, financial markets gave us a reminder about how much reality can differ from apparently probable outcomes.  Fortunately, the surprises work in the favor of the mortgage market today as rates are sharply lower (at least in the context of the recent range, which has been extremely narrow).

Bonds (which underlie rates) drew motivation from a combination of factors today.  These included compulsory trades that had to be made by the end of the month, automatic trades made in response to certain lines in the sand, and safe-haven trades resulting from the massive losses in the stock market.  The net effect for the average mortgage borrower is a noticeable improvement in upfront costs at the very least (for instance, a quoted rate may be the same as yesterday, but the associated closing costs would be lower). 

In other cases, the rate itself could be an eighth of a percentage point lower, although in those cases, the drop in rate would likely be offset, in part, by a slight increase in upfront costs.  If we derive an "effective rate" from the combination of the two, today's drop is equivalent to 0.04% for the average lender.