Treasury Yields and Mortgage Rates Still Clinging to Historic Low Levels

Late last week, the yield on the 10-year Treasury bond briefly touched on the 2.5% level, an area not witnessed since 1954. Also, the 30-year Treasury yield dropped to near 3.0%, which is the lowest level since the government began issuing the paper. All of this is of course good news for mortgage rate shoppers as rates are still holding near historic lows. Yes, the mortgage spread premium has also decreased, but is still way above historic norms. In fact, if the spread was behaving in an historical stance, we would be experiencing 5.0% par rates! Still, the current 5.5% mortgage rates are nothing to sneeze at.

Also, late last week, a news story broke that the Treasury might take 30-year fixed rates down to 4.5%. We’ll have to wait on that one though, as much wrangling still needs to be done. Supposedly, the 4.5% rates would only be offered to home buyers in an effort to stimulate purchases and a recovery in the housing markets. There was much opposition to this notion as being discriminatory toward those refinancing, so there will most likely be a political fight on this measure. It may never hit the ground, but at least the government is looking at continued bold movements to help our ailing economy and housing markets.

Actually, right now would be a good time to lock in rates if you are looking to refinance or purchase a home. It is unlikely that the Treasury yields will get much lower, and the possibility of the mortgage spread increasing is a distinct probability. The recent big drops in mortgage rates have caused a stampede in mortgage applications. So much in fact that the ramped-down mortgage industry is having trouble keeping up with the demand. Many feel that spreads may increase to increase their profit spread while slowing applications to a level that can be handled.

On the home front, October’s pending home sales were released and they only dropped by .10 percent, much better than analysts were anticipating. We can’t be too quick to jump the gun and announce that we have reached a bottom in the housing market, but any positive sales numbers are a welcome sight. Possibly, a combination of current low mortgage rates and lower priced homes will help to stabilize housing sooner than anticipated, but only the future will tell.

The overall economy is still a huge mess. Numbers on just about every front are indicating further pain, and corporate sales forecasts into 2009 are not pretty. About the only good news lately has been lowered mortgage rates and a continued decline in oil prices.

Bottom line, if you are looking to refinance, current conditions are optimal as long as you have adequate home equity and a stable income to meet the debt ratio requirements. Most that are refinancing now are realizing several hundred dollars per month savings, which couldn’t come at a better time.


May the Mortgage Refinance Rates be with You!

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