Mortgage rates recovered most of yesterday's losses today, following turmoil in European financial markets.  What does Europe have to do with rates in the US?  A lot, actually.  In fact, Europe deserves credit for most of the glacial move toward lower rates seen from early 2014 through mid-2016, and was a key ingredient of the low rate environment in 2011-2012. 

More recently, Europe has been heading in a more American direction when it comes to monetary policy, and that's resulted in upward pressure on rates.  Most recently, investors are having some doubts about Italy's willingness to play nice with EU rules.  When that happens, investors seek safety in the core of the European bond market.  In other words, they buy bonds from Germany and other safe-haven countries.  While US bonds aren't high on that list, they still experience some of the benefits, and higher demand for bonds equates to lower rates.

Today's drop in rates wasn't extreme, but it did manage to undo most of yesterday's damage.  It continues to be the case that anything short of an extreme move leaves rates painfully close to the highest levels in more than 7 years.