WASHINGTON–Government bond yields have been plummeting, but mortgage rates haven’t fallen so fast.
An analysis by the Wall Street Journal noted that the 10-year yield closed at 1.387% last week, while the national average for a 30-year, fixed-rate conforming mortgage was 3.41%, according to the latest data Freddie Mac released. The spread between the two, at 2.02 percentage points, has risen in recent weeks and is at one of its widest levels since mid-2012, the Journal reported.
“That should bolster bank profits from making mortgages,” the report stated. “For banks and investors, that is a silver lining of the super-low interest-rate environment, which threatens to crush overall bank profits. Those come under pressure because falling bond yields mean banks lend out money at lower rates, even though they can’t reduce their own cost of borrowing since many are already paying next to nothing for deposits.”
As CUToday.info previously reported, the Wall Street Journal said a refinancing wave should be taking place right now, and still could in the near future.
“Mortgage rates right now should be at least 3.25%, if not lower,” for 30-year fixed-rate mortgages, said Guy Cecala, publisher of trade publication Inside Mortgage Finance, told the Wall Street Journal.
Added the Journal, “Indeed, if the difference between the 30-year mortgage rate and the 10-year Treasury yield were at its average level for the previous 10 years, the average mortgage would be 3.17%. Mortgage rates key off the 10-year Treasury because most homeowners tend to move within around 10 years, repaying their loans in the process.”