Fannie Mae (FNMA)

[Robert from yahoo bd]

"Hidden Force Helps Home Buyers --- Spread between 30-year mortgage and Treasury benchmark keeps rate in check

A key factor that pushed up mortgage rates over the past two years is now starting to pull them down.

Average 30-year fixed mortgage rates have been higher than usual relative to the benchmark Treasury yields they typically track. But that extra differential, or spread, has been shrinking for eight straight weeks. It is now at its lowest since March.

The 30-year mortgage rate has fallen by more than a percentage point recently to 6.62%, according to data released Thursday by mortgage giant Freddie Mac. The shrinking spread between that and the 10-year Treasury yield amounts to roughly one-sixth of the decline. (Treasury yields have also fallen sharply.)

The spread is still far larger than its historical average. But its downward trend is giving mortgage rates an extra push lower. It is a boon to would-be home buyers who have been sidelined by high borrowing costs, as well as to hard-up mortgage lenders and real-estate agents.

"Rates have come down since October and everyone in the industry is excited about that," said Adam Haller, a mortgage-loan officer based in Raleigh, N.C.

The reason the spread exists in the first place has to do with the machinery behind the home-lending industry."

-WSJ 01/05/24