Mortgage Rates Do Not Equal 10-Year Treasury Rates
The 10-Year Treasury Yield dropped almost 4/10% recently – so why didn’t mortgage rates drop that much?
The 10-Year Treasury yield (interest rate) is a reflection of what it costs the government to borrow money and is perhaps the most influential interest rate/yield in the world.
Hence, when the 10-Year yield drops, the media will widely report that rates are falling, which prompts borrowers to think that mortgage rates are falling.
This happened recently as the 10-Year yield dropped from almost 1.7% in late November to almost 1.3% in early December.
Plummeting 10-Year yields sparked “RATES ARE FALLING” headlines but mortgage rates barely moved.
Hence, it is important to note that while mortgage rates usually move in unison with 10-Year rates, they do not always do so.
In the “olden days” (the 1990s) when we had to call up the “Bond Market Hotline” on the telephone to see what rates were doing, a 4/10% drop in the 10-Year Treasury could have resulted in as much as a 1% drop in mortgage rates. But… not so much in today’s volatile, unusual, and much more manipulated market.
What Are “Interest Rates?” Do They All Move In Unison?
Last year, I wrote a blog called What Are Interest Rates? Do They All Move In Unison?
In that blog, I discuss the differences between the (1) 10-Year Treasury Yields; (2) The Prime Rate; (3) The Fed Funds Rate; (4) Mortgage-Backed Security Yields; and (5) Average Mortgage Rates.
I also explain how there is no “one mortgage rate” that market-watchers follow and how all the rates do not always move in unison. I highly recommend revisiting that blog and/or sharing it with clients.
No “One Interest Rate” For Borrowers Too
As a quick aside, we often tell individual borrowers that there is “no one interest rate” for them as well.
This is because there are as many as twelve factors that impact an individual borrower’s rate, as I explain in this blog – 12 Factors That Impact A Borrower’s Rate (another blog I strongly suggest revisiting or sharing with clients).
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