Rates Are Lower Mid February 2020

Do you read Calculated Risk blog? If you don’t you should as it’s an easy to read/straight forward economic blog that gives great insight as to what is going on in the US economy.

And the author of the blog, Bill McBride, correctly predicted the 2008 housing crash and recession. Anyway he had a good post today about current rates and references another excellent source, Mortgage News Daily, about the relationship between the 10 year yield and mortgage rates.

10 Year Yield And Mortgage Rates:

The 10 year yield is currently around 1.55% and the most “prevalent” 30 year fixed rate is just under 3.50% so currently there is around a 1.8% to 1.9% spread between the two (depending on the day).

According to the Freddie Mac survey the all times low was November 2012 when 3.31% was recorded as the average 30 year fixed mortgage rate offered to borrowers. According to Bill McBride we’ll need to see a 1.4% (or around there) 10 year yield for us to break 3.31%.

Don’t Get Too Excited:

Even though the market is close to 1.4% don’t get too excited even if it moves down to that level. I’ve been a mortgage professional for more than15 years and I can tell you from experience that just because the 10 year moves to a certain level does not mean consumer mortgage rates will follow.

We’ll need to see two things for mortgage rates to move into all time low territory. Those two things are:

  • Mortgage Backed Securities need to rally as well.
  • Lenders desire to push rates lower.

The fact is that when lenders are super busy, which they are right now, they have little to know incentive to lower rates further. Even if the bond market improves. To give us the best shot at hitting new lows volume will have to ease up a bit so that mortgage lenders can get caught up.

I suggest we look forward to better understand what might happen with mortgage rates as we move into Spring. And it’s always better to be cautiously optimistic rather than overly confident.

The market can change in a heartbeat and moves higher can be brutal.