“If stocks are selling, and if people are generally pretty panicked about the state of the global economy, bond markets are a natural safe haven,” said Matthew Graham, chief operating officer of Mortgage News Daily. “Popular opinion about rates moving higher only helped. Too many people were on one side of that trade, and it almost always makes sense to root for the underdog in those scenarios.”
Lower mortgage rates certainly offer homebuyers lower monthly payments and at the same time help them to qualify for larger loans, so they can buy more expensive homes. The latter is particularly pertinent this spring, as home prices are rising due to record low supply of homes for sale. On the flip side, a weaker economy, stock market losses and general unease about the fate of employment and wage growth all hurt housing.
“Frankly, a healthier economy would be mortgage rates in the 5 percent range, but that’s also assuming you could get 2 percent in your checking account,” Cecala said.
Read MoreWhat negative rates mean for average investors
Now not only are mortgage rates nearing their record lows set in 2012, there is new talk of the Federal Reserve moving to a negative interest rate policy. Fed Chair Janet Yellen said Thursday it was not out of the realm of possibility.
This would not, however, translate to negative mortgage rates. That is impossible. Lenders only lend if they can make money.
“As far as the connection to mortgage rates, it’s no different than it was,” said Graham. “The Fed rate is only loosely connected over longer time horizons. Whether the Fed hikes or cuts below zero, the global economic panic will be good for rates.”