Mortgage Rates Slipped to 6.65% in the Week Long Bonds Sold Off
The 30-year average declined for a second straight week even as the 30-year Treasury yield touched its highest level since 2007 — a divergence that says more about spreads than about relief.
The average rate on a 30-year fixed mortgage fell to 6.65% this week from 6.67%, a second consecutive weekly decline, according to the standard national survey. The 15-year average slipped to 5.95%.
The oddity is what happened around it. The 30-year Treasury yield reached 5.34% on Tuesday, its highest since 2007, and the 10-year rose to about 4.7%.
Why the two moved apart
Mortgage rates are not set off the 30-year Treasury; they track the 10-year more closely, because homeowners refinance or move long before thirty years elapse. And the survey measures rates offered over a period, which means it lags the sharpest daily moves in the bond market.
The rest of the explanation is spread. The gap between the 10-year yield and the 30-year mortgage rate has been wider than its historical norm for three years, and some of that cushion absorbed this week's move rather than passing it through immediately.
Borrowers should expect the arithmetic to catch up if long yields hold at these levels.
The comparison that matters to buyers
A year ago the 30-year averaged 6.58%. Rates are essentially where they were, after a year that included an oil shock, a change of Federal Reserve chair, a 2007-high in long bond yields and a brief dip below 6% in February.
That stability is the whole story of this housing market. Buyers waiting for relief have now waited three years, and the cost of waiting has been paid in rent and in prices that kept rising — the median existing-home price is up about 2% over the past year, the 37th consecutive month of year-over-year increases.
What would actually move it
Two things: a decline in long-term Treasury yields, which requires an inflation outcome the Fed has not yet secured, or a narrowing of the spread, which requires more clarity about the future of the mortgage-backed securities market than currently exists while the government weighs what to do with Fannie Mae and Freddie Mac.
Neither is likely before the autumn, which means the affordability math facing a buyer this month is roughly the math they will face in November.
