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Thats cuz the 30 yr doesnt follow the 10 year anymore. It never really did, but it used to be a good guide.
Try following the FMNA bond and see how the 6% coupon moves.
With the wacky credit market on Wall Street, the spread between the 10yr T-Note and MBS is fluctuating. It used to be a very solid indicator...not as much today...but still something good to watch.
However floating is a dangerous proposition, very little upside usually.
Lender rating
Since January 2009
The 10 year treasury has nothing to do with mortgage rates. Although a good number of loan officers will tell you that mortgage rates move with the 10 year and a year ago I would say that the corelation was pretty strong however since the credit crunch not so much.
Tom- historically, the 10 year note was a damn fine barometer... Saying "it 'never' did" is a bit much. I was brought up on the 10 year being the best way to gauge rate movement. Only recently did the two seem out of whack, and then I made the good decision of asking people on here what was up... Good move, as it really saved my behind...
dh- one would think they would fall more in line, but we may not see that again (for whatever reason) until the fall (pre-election). With all the bad economic news though, I would think rates would improve in the short term. That's my gut feeling anyway. two weeks is tough to say though. Go with what you are comfortable with. :)
Lender rating
Since January 2009
Jenn,
The correlation was never as strong as the perception. But for a lay person it is/was the easiet number to track.
Andrew, put it this way... if the yields dropped 10 basis points on a Monday, we knew Tuesdays rates were going to be better. If the yields rose 3-5 basis points, we knew we would be getting a reprice and we'd better lock if we wanted a certain rate. It wasn't rocket science, and like I said, it was a very good barometer of rate movement. Until recently, as you suggested.
Lender rating
Since January 2009
Jenn,
Historically that was only accurate about 1/3 rd of the time. 99.9% of loan officers would have and believed what you just posted up until a year ago.
Note the 99.9% number is completely made up, just wanted to emphasize that the way you viewed the 10 year treasury was a common practice.
dhisler - here is the consumer version of a blog I follow daily. It will give you a good understanding of what is is going on in the market and a better understanding of why the rates are where they are. Mortgage News Daily Consumer Blog Enjoy!
Lender rating
Since January 2009
Nice link Chris.
Thanks Salem. I am a big fan of that site and will enjoy while I can (for free) as they are moving to a pay model in the near future. I usually have a pretty good idea of when to float or lock but this site gives you the heads up on what data is coming out and when. It has been a valuable resource. The link is for the consumer version which isnt as technical, you can switch to the professional's version off that same page.
andrew, not too sure what you are suggesting here. How should I have viewed the 10 year note?
Mortgage rates do not (and never have) followed the 10 year bond. The 10 year bond used to be a good general (but not perfect) indicator of which way mortgage rates are heading.
Mortgage rates are determined by investors who purchase mortgage backed securities. To determine where rates are really going, you will need to follow the FNMA 6% 30-Year coupon.
LC,
Nobody is arguing the origin... bu to a consumer, where is the easiest "mortgage rate" barometer? It is nowhere easy to be found. That's the point Jenn was making. I was in hopes someone would have a link to an active "chart" like what any person can see when they simply visit yahoo finance or listening to Rick Santelli on CNBC. Fixed security/bonds... they are all fixed instruments and travel basically in the same direction, correct? or am I missing something? As the 10 year has climbed from 3.36% yield earlier this year, didn;t we have 5.5%ish rates paying 1 YSP... Now 3.80% 10yr... (45bps hihger) and we have rates a little north of 6% paying 1 YSP.... seems kinda correlatingly to me at least for the borrower who asked the question. It seems like we are trying to advise people that there is this secret science to mortgage pricing. Here's how they could get better.. have people pay their mortgage so that FNM and FRE didn't collapse and need just $75bil in capital. That is the main reason for the "spread widening". It used to be .25 - .375% for JUMBO remember as a rule for years and then thanks to Thornburg and their JUM buddies and the defaults.. no market and the spread widened like the Mississippi Delta. It's all good, but can someone provide the consumer link for mortgage pricing for dummies please?
link: www.zillow.com
Thanks Martin. You seem to grasp where I am coming from here. I am not suggesting that the 10 year note and mortgages rates were tied together by a fixed margin, all I am saying is that it was always a very good way to tell us which way the rates would be heading. Very simple.
Lew, your first two sentences completely contradict each other.
Evenin' Jenn and MATT!!!!!,
Been a while and I fully understand where you are coming from.. EXXON MOBIL does not price from the exact same distributor as BP, but it is funny how close PREMIUM is at the pumps and they seem to raise or fall almost.... in unison.. sometimes the Cokes are cheaper at the one, but the other has PEPSI on sale... very close... Missed you Matt, but I have been watching you live at 7 am on NBC for my fix.
The 10 year note never was tied to the 30 year rates. However, the perception between the strength of long bonds and long term mortgage rates has been in parallel that many folks believed that it was the actual indicator.
It never was.
The FMNA bond is the indicator I have been using for the last year.
tom- what did you use prior to this year?
Lender rating
Since January 2009
I don't know how you can advise someone to follow the 10 year treasury as an indication of what will happen with rates when they do not always move in the same direction. In general they move in the same direction, but not always.
Banks need to make more thses days guys, check the balance sheet. That's the reason the 10 year bond means less today. The banks are keeping the spreads higher to make up for the billions in losses. Who do you think has to pay for that eventually?
The thread started T by a borrower looking for the or a simple answer. We all know they are not priced directly from the 10 year, but where is the mortgage rates for dummies link to share... and furthermore lay a graph on top of each other and I bet they moved "not in opposite directions" and that is all Jenn was saying. This is not that hard as it was a simple question. For the record, I use the 10 year as a simple gauge as to what FIXED securities are doing as I don't have Barry on my ipod yet. No venom in my comments, but we are making rocketscience out of a ratesheet, that's all. As far as using the FNMA bond.. we may need a different acronym to watch as they are tanking.
Lender rating
Since January 2009
That's just plain wrong!
Investors are afraid to invest in MBS because all of the crap loans that were being bundled and sold as a secure investment when in fact they were anything but!
Mortgage rates have never been and will never be set by the 10 year treasury.
andrew, right now, yes. That seems to be true. But for you guys to say 'never' as in 'we smart people NEVER looked at bond yields to figure out which way rates were going' would be surprising if it were true. Are you and Tom saying that you NEVER used the bond yields to figure out whether you should lock or float? NOT today, two years ago... 5 years ago... NEVER means never, so I'm just curious there. As Martin said, a 4.30 bond yield does mean higher rates. May not be AS definite as it once was, but it's still holds some water. You'd be foolish to say that if you saw the bond yields drop 50 basis points over the next month rates would RISE. That's all we're saying, really.
andrew NO ONE is saying that they are directly tied or 'set', merely that they are all INDICATORS of where money is going, and whether or not rates will rise or fall. No margin. No index. No set basis point differential. What don't you understand about what we are saying???? Your confusion is confusing me :)
Velma
You need to re read my original post.
.......Thats cuz the 30 yr doesnt follow the 10 year anymore. It never really did, but it used to be a good guide. ...................
.............Try following the FMNA bond and see how the 6% coupon moves. ..............
I stated quite clearly that almost all of us used the 10 yr yield as the indicator because it was easy and FREE. It served its purpose.
But then taking that step to thinking it WAS the actual indicator of how banks lend money is WRONG. It never was. And a LOT of loan officers actually thought it was.
The FNMA bond info costs money to recieve . Why not just use the 10 yr yield? So we all did.
Until it no longer worked due to extrordinary circumstances in world markets.
Martin
Yeah,
Martin
Actually. My answer to the fellow was the answer he needed. He couldnt understand why the 10yr has dipped and the rates havent.
So I let him know where he can get some accurate info as he is trying to look into his crystal ball.
I know you didn't lead them astray at all. It's just a very clunky opaque and mysterious instrument that we "throw" around some times that's all. It's all good with me.
Tom, please note that my remarks were directed to you and andrew. I saw what you wrote, and asked you what you used prior to this past year. You state now that you used the 10 year note. Great. We're all on the same page now.
As for me, I don't know a SINGLE loan officer who actually believed that the 10 year yield was TIED to mortgage lending rates. It's not like we said 'ok, the yield ended the day down 5 basis points, Chase will be repricing to 6.25% paying 1.205YSP tomorrow!'. Who did that? Who would have thought that? NO ONE. The point is, the ups and downs could be charted by watching the 10 year note.
Velma
I think the original poster --the potential homeowner - thinks the 10yr is tied to the 30yr rates.
As for loan officers? I have to disagree. For a long time I honestly thought the 10 year goverened mortgage rates. Or at least the banks lowered and raised them due to whatever 10 year did.
And the vast majority of loan officers I knew actually believed it as well during this latest housing boom.
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10 Yr Yields and Mortgage Rates
dhisler
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The yields on the 10 yr have gone from 4.3 to 3.83 in the last two weeks, but I haven't really seen any significant changes in the 30 year fixed mortgage rates. Do you anticipate mortgage rates declining to move in line with the 10 yr Treasury yields. BTW - I plan on locking in my rate within the next week for a conventional 30 yr fixed, so any input on where you anticipate rates moving in the next two weeks would be helpful. Thanks.
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