It was a record-setting week all around, which adds up to good news for mortgage shoppers:

• The Federal Reserve lowered the Fed funds rate to a range of 0% to 0.25%
• It was announced that the Consumer Price Index fell by a record 1.7% in November
• Oil plunged to below $40 a barrel
• 30-year mortgage rates fell to 5.19%, the lowest level on record

While economic weakness is enough to give some home buyers pause, it is important to remember this same economic weakness is creating the extraordinary buying opportunity.

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Current events give a good demonstration of what really drives market interest rates:

• The Federal Reserve decided to leave short-term rates unchanged, at 2.0%
• And yet, thirty-year mortgage rates have eased off their recent highs over the past two weeks

The reason for the drop in mortgage rates can be traced to a third significant development:

• The price of oil slid to around the $120 a barrel mark, some 18% below its peak of $147

All of which suggests that potential homebuyers — or mortgage refinancers — would do well to keep their eyes on the price of oil in the weeks ahead. 

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