Mortgage Rates: Looking Good, and Maybe Even Better Soon

Mortgage Rates: Looking Good and Looking Even Better Soon?

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Updated on October 6th, 2020

Mortgage rates held steady this week at 3.65 percent for a 30-year, fixed-rate loan. It’s the first time all year that rates didn’t fall in Freddie Mac’s weekly survey of lenders.
Rates fluctuate all the time, and there are a multitude of ways to track them, but economists look to Freddie’s survey as a key benchmark of which way they’re moving.

Mortgage rates, the big picture
Source: Freddie Mac

Clearly they’ve been moving down. And here’s more good news. Mortgage costs tend to fall when the cost of government borrowing falls, and government borrowing is incredibly cheap right now. This week, the yield on a 10-year Treasury is about 1.78 percent, meaning the U.S. is paying its creditors next to nothing.

Why would anyone loan money and collect only 1.78 percent interest? Because they’re confident the government will pay the money back. It’s a low-risk bet. And in this age of global economic turmoil, those safe bets are in high demand. Investors are willing to sacrifice profit to protect their money.
As we’ve said, mortgages tend to get cheaper when Treasuries get cheaper. But look at this chart, which shows how much cheaper Treasury yields and mortgage rates have gotten since last summer.  The 10-year Treasury has dropped 54 basis points since the beginning of this year. Mortgage rates have fallen only 36 basis points, according to Freddie Mac.

mortgage rates
Source: Freddie Mac, Federal Reserve, Redfin

Will mortgage rates drop to catch up with falling yields? History suggests they will. And just in time for spring house-hunting.
— With Tim Decker

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Lorraine Woellert

Lorraine is enjoying her first real job after a career in journalism. She’s based in Washington, D.C., where she writes about housing and the economy. Before joining Redfin, Lorraine was at Bloomberg News reporting on politics, financial mayhem, housing and the economy. Her dream home is a top-floor loft with a pool, friendly neighbors and a terrace for throwing parties. Everyone's invited. Redfin is a full-service real estate brokerage that uses modern technology to make clients smarter and faster. For more information about working with a Redfin real estate agent to buy or sell a home, visit our "Why Redfin?," page.

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