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To: Sam Sara who wrote (85088)3/24/2001 3:52:24 PM
From: stomper  Read Replies (1) | Respond to of 436258
 
Mortgage rates are linked to the 10 year Treasuries.

-dave



To: Sam Sara who wrote (85088)3/24/2001 6:08:15 PM
From: Simba  Read Replies (1) | Respond to of 436258
 
Mortgage securities of different maturities compete with other similar fixed-income securities such as treasuries. For a long time the 30yr fixed rate used to track the 30yr treasury with a spread of about 150 basis points (mortgage rate = 30yr treasury rate + 150 basis points approx). But when the fed started buying back 30 yrs it caused a sudden disconnect in the 30 year market. Then they started tying the 30 yr fixed mortgage to the 10yr treasury and I think it remains that way now.

Shorter maturities such as 15 yr and 10 yrs track the 10year treasury.

As Bill Gross (King of Bonds) recently said the party in the Bond market is over. He predicts the 30 year to fall at worst to 5% or a little below that. That translates to a 30 yr fixed to bottom about 6.25 to 6.5. Now if Nasaq were to crash further to say < 1000 and DOW to less than 6000 then a severe recession ensues then we may see 30 year rates fall below 6%.

If we get a Japan like situation then you may be able to get the 30 year at 2 or 3% I guess, but then one may not have a job to pay the mortgage ubder such an interest rate environment. I was told by someone that a rate of 4% on the 30 year was considered too high in the 50's in the US by one of my colleagues. Can someone really confirm that the 30 year fixed was indeed < 4 % in the 50's ?

Simba



To: Sam Sara who wrote (85088)3/24/2001 8:54:33 PM
From: Ilaine  Respond to of 436258
 
As the others told you, the mortgage rate is linked to the 10 year bond, but just to make it clear the linkage isn't direct. Mortgage rates are subject to the law of supply and demand, and go up when there is heavy demand, e.g., spring and summer, and down when demand is slack, e.g., the dead of winter.

The fact that mortgage rates are reportedly going down now even though it's spring probably means there is less demand for new mortgages.


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