Mortgage Rates, Strangely, Remain Aloft --- Bond-Market Chaos Plays Role in Unusual Divergence
NEW YORK -- Something strange is afoot in the mortgage market -- and it is causing home buyers to fork over more money.</br></br>By all accounts, rates on mortgages should be tumbling. That is because mortgage rates typically track interest rates on long-term bonds, which have been falling since the beginning of the year.</br></br>But mortgage rates have remained essentially flat, causing the gap between mortgage rates and bond yields to widen by the largest measure in years. Unfortunately for home buyers, this trend comes just at the beginning of the spring buying season, when activity in the residential real-estate market peaks.</br></br>Freddie Mac, the mortgage servicer, said yesterday that the rate for a 30-year-fixed-rate mortgage averaged 8.20% this week. While down slightly from 8.23% last week, it isn't much different from three months ago, when the average rate was 8.15%. During the same period, yields on 10-year Treasury notes, most frequently used to set mortgage rates, have fallen to about 5.9% from about 6.5%. (They were quoted at 5.915% late yesterday.)</br></br>On a $200,000 mortgage, the difference between an 8.2% rate and a 7.6% rate is about $84 a month on a 30-year conventional fixed-rate mortgage.