The Federal Reserve’s rate cuts aren’t doing much to lower mortgage rate for new buyers, but they could help holders of existing adjustable rate mortgages.Rates on home-equity lines of credit, credit cards and auto loans have all dropped. In addition, millions of homeowners won't face higher rates as their adjustable-rate mortgages reset.
Applicants for new mortgage are likely to continue to pay more. Mortgage rates typically follow the 10-year Treasury and have historically traded at about 1.8 percentage points above the 10-year Treasury yield. Those Treasurys currently yield about 3.451 percent. But investors, including pension funds, insurance companies and bond mutual funds, are demanding a greater premium these days for mortgages over less risky U.S. Treasurys.
The best advice for those seeking a mortgage: shop around. All mortgages aren’t priced alike, experts say.
Source: The Wall Street Journal, Jane J. Kim and Ruth Simon (03/19/2008)
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