Monday, November 14, 2016

Mortgage Rates and Ten Year Yield, Expect 4% Mortgage Rates

by Bill McBride on 11/14/2016 11:03:00 AM

Rates are rising with the expectation of much larger deficits next year (tax cuts combined with more spending).

With the ten year yield rising to 2.25% today, and based on an historical relationship, 30-year rates should currently be around 4.1%.

As of this morning, Mortgage News Daily reports that 30 year fixed rate mortgages are around 4%. Pretty close to expected.

The graph shows the relationship between the monthly 10 year Treasury Yield and 30 year mortgage rates from the Freddie Mac survey.

Mortgage rates and 10 year Treasury YieldCurrently the 10 year Treasury yield is at 2.25%, and 30 year mortgage rates were at 3.57% according to the Freddie Mac survey last week.

So expect mortgage rates to rise this week to around 4%.

Also, we should see a sharp drop in refinance activity.

Currently I don't think this increase in rates will have a significant impact on the housing market.