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recent stock sell-off in major tech stocks, driven by Chinese AI newcomer DeepSeek, may bring modest relief to mortgage rates this week. The Nasdaq composite closed down nearly 3% on Monday, with shares of AI-focused chipmaker Nvidia plummeting 17%, shaving nearly $590 billion from the company's market cap.

    As investors fled to safety, bond prices rose, driving yields on 10-year Treasury notes down nearly 10 basis points over the day. This could mean lower mortgage rates for homebuyers in the near term. Rates on 30-year fixed home loans averaged 6.96% last week, according to Freddie Mac.

    "Mortgage rates are likely to fall this week in the widely tracked Freddie Mac index," says Realtor.com Chief Economist Danielle Hale. However, she notes that lasting mortgage rate relief will come from broader economic stability and ongoing improvement in inflation.

    DeepSeek's recent launch of a free, open-source AI product called R1 has raised concerns about U.S. tech companies overspending on capital investments in AI. The company claims to have built R1 at a much lower cost than its competitors, sparking fears that the market is ripe for disruption.

    The sell-off may be short-lived, as tech stocks are already reversing some losses on Tuesday. Wedbush analyst Dan Ives calls the sell-off a "buying opportunity," dismissing DeepSeek's claim of a $6 million startup budget as likely fictional.

    Federal Reserve policymakers will announce their latest interest rate policy on Wednesday, which could impact mortgage rates. However, bond markets are pricing in a 99% chance that the Fed holds steady at its current policy rate of 4.25% to 4.5%. A surprise cut would send bond yields and mortgage rates lower, but this seems unlikely.

    The Fed tends to focus on fundamental metrics such as economic growth, inflation, and job creation when making rate decisions, rather than responding directly to stock market gyrations.