Mortgage rates remained at their lowest level ever this past week, even as 10-year Treasury yields stayed elevated compared to where they were in recent months.
“Mortgage rates remain at record lows, resisting their typical correlation to Treasury yields, which have recently been moving higher,” Sam Khater, Freddie Mac’s chief economist, said in a press release.
“Mortgage spreads — the difference between mortgage rates and the 10-year Treasury rate — are declining from their elevated levels earlier this year. Although today’s mortgage spread is about 1.8% and still has some room to move down if the 10-year Treasury continues to rise, it’s encouraging to see that the spread is almost back to normal levels.”
While the 10-year yield ended the period relatively flat compared to one week ago, the high in the last seven days was 0.986% on Dec. 4 and the low was 0.893% on Dec. 8. On Dec. 9, it closed at 0.941%.
Those higher Treasury yields are a result of investor optimism over reports of a COVID-19 vaccine and progress regarding the passage of another stimulus package by the government, added Matthew Speakman, an economist at Zillow, in his weekly commentary on that company’s rate tracker issued Wednesday evening.
Zillow’s rate tracker, based on offers made by lenders on the site, trended down to near-record lows. “Many factors are contributing to this unorthodox movement, but the relatively muted changes in mortgage rates is mostly thanks to enduring demand for loans. Demand for mortgages has been so strong for so long, that to stem the tide of borrower requests lenders have been forced to keep rates above where the market would normally indicate,” Speakman noted.
"Since mortgage rates didn’t fall in recent months by as much as bond yields would suggest they should have, there is now less pressure on them to rise once bond yields start to increase — and it’s likely that this dynamic should continue. A surge in bond yields — something that would prompt meaningful upward movement in rates — appears doubtful given the fact that any fiscal relief would li kely be in line with investor expectations," Speakman said.
According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage averaged 2.71% for the week ending Dec. 10,
The 15-year fixed-rate mortgage averaged 2.26%, unchanged from last week. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.19%.
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.79% with an average 0.3 point, down from last week when it averaged 2.86%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.36%.
