THE ANGELS – It is expected that the rates Mortgage rates will go down at the end of this year, but any benefits for home buyers could be mitigated by the evolution of the financial instruments market linked to mortgages.
In recent years, uncertainty about inflation and the path of mortgage rates led investors to demand a higher return from holding mortgage-backed securities relative to what they would get from buying 10-year government Treasury bonds.
Mortgage-backed securities are investments made up of mortgage loans and, like bonds, pay interest to investors. The difference in interest, or yield, offered by each of these types of investments can be measured by looking at the spread between mortgage rates and U.S. government bond yields.
Historically, that spread averaged about 1.7% per month. It rose last year, soaring in June to nearly 3%, the widest gap since August 1986, according to Federal Reserve data.
“When rates started rising, we basically didn’t know how high or (for) how long,” said Mark Fleming, chief economist at First American Financial. “Investors in mortgage-backed securities said, ‘We need to charge you more than the risk-free 10-year Treasury rate to be willing to buy a mortgage-backed security.’”
The bond and mortgage markets are sensitive to what happens with inflation, the Federal Reserve’s interest rate policy and other factors. Signs of cooler inflation and hints from the Fed that it might begin cutting its short-term rate this year have helped lower mortgage rates and bond yields after both hit multi-year highs in October.
Those moves have weighed on the spread between the average 30-year mortgage rate and the 10-year Treasury yield, keeping it mostly lower this year. Last month it fell to 2.61%.
Resale offers on the rise
The resales of households in USA They had their largest monthly increase last February, of 9.5%, a surprise for analysts who expected a fall. A greater supply of properties on the market consolidated the increase.
Thus, in February, 4.38 million households changed hands in an annual projection (the figure projected 12 months into the conditions at the time of measurement), according to data published by the National Federation of Realtors (NAR) at the end of March.
Analysts expected a figure of 3.95 million properties, according to the consensus compiled by Market Watch.
“An additional offer of living place helps meet market demand,” said Lawrence Yun, NAR chief economist.
Increase is due to demand
“Demand for households is constantly increasing due to population and employment growth,” he added.
The rates of 30-year mortgage loans, the most popular in USA, they gave way slightly. In mid-March they stood at 6.74% annually, according to the refinancing agency Freddie Mac.
Source: With information from AP and AFP
