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The Market That Drives Mortgage Rates Just Had Its Worst Day in Weeks

Mortgage rates don’t just magically appear.  Lenders don’t choose them arbitrarily.  To sustain the pace and scope of the mortgage market in the US (and indeed of most any debt), the cost of money over time has to be carefully considered before a lender knows where to set its rates.  When it comes to something like the money the US government borrows, it’s the Treasury market that determines the cost of money over time.  In other words, open trading in financial markets results in the yield (aka rate) on a 10yr Treasury note being at one level while the rate for a 30yr Treasury note is at a different level.
There’s a market for mortgage lenders to openly trade groups of mortgages (or even individual mortgages) too!  Like the US government sells Treasuries to fund operations, mortgage lenders sell Mortgage-backed securities (MBS) on the open market.  The prices paid by investors determine the value of MBS and consequently the line in the sand for mortgage lender profitability….(read more)Forward this article via email:  Send a copy of this story to someone you know that may want to read it.
Source: mortgagenewsdaily.comNew feed

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