In the past week, as well as over the past several weeks, fixed mortgage rates have yo-yoed up, down, and around the 6.4 percent mark. But yields on ten-year Treasury notes, to which fixed mortgage rates are typically closely related, have moved consistently lower. Treasury yields have fallen one- quarter percentage point in the past week and nearly one-half percentage point since Feb. 20. This has not translated into lower mortgage rates, as the spread between risk-free Treasury debt and rates for mortgages has expanded. This wider risk premium reflects the nervousness about credit quality and the financial health and capability of entities that guarantee payments on mortgage-backed securities. Conforming mortgage rates are one full percentage point higher than normal, given the level of Treasury yields. For larger jumbo mortgages, the spread is nearly two full percentage points wider than customary levels.
The mortgage rate winds can change direction quickly. On Jan. 23, the average 30-year fixed mortgage rate was 5.57 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,144.38. Now that the average conforming 30-year fixed rate is 6.39 percent, the same $200,000 loan carries a monthly payment of $1,249.70.
