Explaining Today’s Mortgage Rates

If you’re watching mortgage rates as they impact borrowing, you may wonder what will occur with them in the future. However, predicting mortgage rates is not easy because they are very difficult to forecast.

mortgage rates

One reliable clue for predicting rate changes is the connection between the 30-Year Mortgage Rate and the 10-Year Treasury Yield. Below is a graph showing these two measurements since 1972 when Freddie Mac began recording mortgage rates.

Mortgage rates

The graph displays information from the past 50 years. On average, the 30-Year Mortgage Rate has been 1.72 percentage points (or 172 basis points) higher than the 10-Year Treasury Yield. When the Treasury Yield goes up, mortgage rates usually go up too. And when the Treasury Yield goes down, mortgage rates tend to go down as well.

This pattern has been consistent for a long time, with the gap between the two staying around 1.72 percentage points.

However, recently, something important to observe is that the gap between the two is widening beyond the usual range (see graph below).

30 years fixes mortgage rates

If you’re wondering why the gap between the two rates is getting bigger than usual, it’s mainly because the financial markets are uncertain right now. Inflation, economic factors, and decisions by the Federal Reserve are affecting mortgage rates and making the gap bigger.

Why Does This Matter for You?

This might seem complicated, but it’s essential for home buyers like you to understand the gap between the two rates. Based on the usual historical difference between them, there is a possibility for mortgage rates to get better today.

Experts believe this improvement will likely happen if inflation continues to decrease. Odeta Kushi, Deputy Chief Economist at First American, explains that if the Federal Reserve eases up on their tight control over the economy, the gap and mortgage rates could go down in the second half of the year. But it’s unlikely the gap will return to its usual 170 basis points average, as there are still remaining risks.

mortgage rates to get better today

Forbes says mortgage rates may stay high because of economic uncertainty and the Federal Reserve’s actions to control inflation. However, they predict rates will go down somewhat later this year, as long as there are no surprises.

bottom line

Bottom Line

Whether you’re a first-time homebuyer or an existing homeowner planning to move to a more suitable home, it’s important to stay informed about mortgage rates and the predictions of experts for the upcoming months. Knowing the trends in mortgage rates can help you make better decisions about your home purchase or refinancing options.

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Tue, 25 Jul 2023 22:30:17 +0000

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