Treasuries Drive Mortgage Rates to New Lows

By Mike Colpitts

Record low Treasury bond yields have driven mortgage rates to new record lows in rate offers set by banks and other mortgage lenders home for sale early Tuesday, according to a review of rates. Treasury prices fell in early morning trading in New York as investors focused on today’s 10-year note sale.

The drop in the fixed 30-year rate found the benchmark mortgage at a low of 3.93% on Money Rates, which is well off a new record low average set last Thursday at 4.12% tracked by Freddie Mac. Mortgage interest rates on shorter term fixed rates and adjustables were also substantially lower.

The 15-year fixed rate loan reached a low of 3.23% in early morning offers made to home purchasers and those looking to refinance mortgages available through Housing Predictor mortgage vendors. The 5-year adjustable rate mortgage hit a low of 2.69%, the lowest rate ever on record.

A $21 billion Treasury bond auction will be a major test for U.S. government debt Tuesday afternoon in the wake of President Barack Obama’s job speech. The 10-year note is expected to sell well under 2% for the first time in U.S. history after the rate of the note reached 1.89%.

Purchases of Treasury bonds at such low yields are having a reverse effect on interest rates. Most financial analysts believed that lower Treasury rates would force banks and mortgage lenders to raise mortgage rates, but rates have actually come down as a result.


High unemployment, averaging 9.1% across the U.S. with much higher levels in many areas especially hard hit by the housing bust and economic uncertainty are troubling financial markets, including bankers who are trying to stir-up more business. The deteriorating debt crisis in Europe is also troubling financial markets.

Stock markets have been on a roller coaster ride for more than a month with wide swings on the New York Stock Exchange industrial average, making 200 point gains one day and then 200 to 400 point losses the next day.