| Mortgage Rates Driven Lower by Falling 10-Year Yield |
Mortgage Lenders Watch the 10-Year Yield Closely Mortgage lenders watch various indicators when they determine what rates to charge for their mortgages, but one indicator seems to stand out from all the rest in the minds of most mortgage lenders—the yield on the 10-year Treasury note (: $TREASURE10Y). [To learn more about some of the other factors mortgage lenders look at when setting mortgage rates, check out the article on...Understanding What Drives Mortgage Rates.] 
Actually, lenders like Citigroup (NYSE: C), Wells Fargo (NYSE: WFC) and JPMorgan Chase (NYSE: JPM) prefer to see mortgage rates falling because falling mortgage rates typically lead to a wave of mortgage refinancing—which is extremely profitable for the lenders. Why Mortgage Rates Are Falling Mortgage rates are falling because the following three things are happening: 1. The Federal Reserve is engaging in quantitative easing to lower longer-term interest rates by pushing down yields at the far end of the yield curve. [To learn more about the quantitative easing, check out this article and video on Understanding How Quantitative Easing Works.] 2. Quantitative easing is pushing down yields at the far end of the yield curve—like the yield on the 10-year Treasury (: $TREASURE10Y). [To learn more about the yield curve, check out this article and video on Understanding the Yield Curve.] 3. Mortgage lenders are lowering their mortgage rates to stay in line with the yield on the 10-year Treasury note.
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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved." |
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