"Mortgage Rates Drop Quickly as Market Panic Sets In"

We could see a 3 handle for mortgage rates tomorrow.

From Matthew Graham at Mortgage News Daily: Lowest Mortgage Rates in More Than a Month

Mortgage rates dropped quickly today as global financial markets underwent a volatile shift. When money is flowing out of stocks and into bonds (as it was today) rates move lower. There are several underlying reasons for the move and it's impossible to assign a value to each of them with perfect precision.

The net effect for mortgage rates hasn't been fully realized yet. Mortgage lenders set rates at the beginning of the day and they don't tend to change their offerings unless markets make a very big move. Today's very big moves came in several phases and lenders only accounted for a little more than half of the underlying change in bond markets. Nonetheless, the average lender ended the day in line with the lowest rates in more than a year. If bond markets merely hold steady by tomorrow morning, mortgage rates will be even lower. [30YR FIXED - 4.0-4.125%]
CR Note: The decline in mortgage rates - from around 5% late last year, to 4% - is a key factor in the pickup in new home sales.

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