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June 13, 2012

Why mortgage interest rates should be even lower

by Jason Grote
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The mortgage interest rate is determined by supply and demand, perceived risk of similar investments, and the general health of the overall economy.  Bottom line, when the economy is strong and growing and health is evident, money flows into the stock market and rates go up to compete for investors.  When the general economy is weak or uncertain, investors choose the safety of investments like bonds and interest rates go down.

I stress this point to make sure my premise is well received.

Now that we’ve handled that, let me tell you about the historical relationship between the U.S. Treasury 10-year bond yield and the 30-year fixed rate mortgage.  Historically the 30-year fixed sits 1.50% above the 10-year bond yield.  Today the 10-year bond is yielding 1.60 percent.  So if we apply the logic above, 1.60 percent plus 1.50 percent equals a projected 30-year fixed at 3.10 percent.

However, as you may have noticed, the 30-year rate isn’t quite down to 3.10 percent. I take this to mean that there should be a downward pressure on interest rates and we should expect a continued decline in rates.

When the economic news is good and our growth is unmistakable, our investors will move from the safety of bonds and the yield will go up.  Make sure to get in now to take advantage of historically low interest rates.

Keep track of similar  logic and insight like this article on our website, www.centralcoastlending.com or contact us today to learn how you can benefit from working with the mortgage experts at Central Coast Lending.

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Central Coast Lending is a California mortgage brokerage based in San Luis Obispo County. With offices in San Luis Obispo, Morro Bay, Paso Robles, and Arroyo Grande, Central Coast Lending is the top source for Central Coast mortgage, real estate, and home loan needs. To see why using a broker offers lower rates and superior service, click HERE. For a free, easy online pre-qualification click HERE or call 805.543.LOAN to talk to one of our expert loan officers. Central Coast Lending: The Mortgage Experts.

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