10-Year Treasury Yield Collapses, Mortgage Rates Follow

posted on August 21st, 2010 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

As noted previously (see Mortgage Rates May Drop Again, May 6, 2010), the rate on a 30-year fixed mortgage is closely related to the yield on the 10-year U.S. Treasury note.  When the yield on the 10-year rises, mortgage rates go up, and vice versa.

Lately, it’s been all about the vice versa.  The 10-year yield has collapsed on renewed fears of economic weakness, deflation, and impotence trumping stimulus.  The yield is now back to where it was in spring 2009 when the stock market bottomed amid widespread despair.

U.S. 10-Year Treasury Yield (Aug. 2005 to Aug. 2010)Source: Yahoo! Finance

That’s good news if you want a mortgage to buy a home in Miami or Coral Gables, because the rate on a 30-year conventional mortgage is hitting its own new lows in the 4.5% range.  Of course, the question is whether home prices in Miami and Coral Gables will fall further if the bond market is right about the severity of renewed economic weakness.  It doesn’t make sense to buy a depreciating asset with borrowed money, no matter how cheap the financing.

Mortgage Rates -- 30-Year Fixed -- Aug. 2005 to July 2010

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posted by // This entry was posted on Saturday, August 21st, 2010 at 8:35 am and is filed under Financial Responsibility, Real Estate Market Data, Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

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