Mortgage rates dropped quickly today, bringing many lenders back to quoting conventional 30yr fixed rates of 3.875% for top tier scenarios.  The motivation came from China.  What's up with that?

It is not at all common to see China mentioned as a source of low mortgage rates in the US.  It is more common for China to be mentioned as a part of big global economic picture, and it's that big picture that brought mortgage rates along for the ride today.  The big picture took cues from the fact that China moved to substantially devalue its currency. 

On the surface, we might wonder why cheaper goods coming out of China would be a bad thing for the global economy, but the effect on international trade wasn't the market's primary concern today.  Rather, it was the underlying message that China is concerned enough about its economic prospects that it has to add this somewhat radical move to other somewhat radical moves already undertaken in recent weeks.   Bottom line, this adds to doubts over the sustainability of global economic growth.  One of the ways investors can bet on slower economic growth is to buy bonds, which results in lower rates. 

When it comes to the implication on lock/float strategy, today makes it hard to go wrong.  Locking multi-month lows is never a bad idea.  Conversely, today's move has a chance to kick off a bigger move lower.  So floating could make sense for those who understand the risks and are ready to cut losses if the recently positive trend turns around.