Interest rates have been plummeting, but the cost of taking out a mortgage hasn’t fallen as fast, the Wall Street Journal reported. Since the end of June, the Treasury yield has fallen about 0.4 percentage point, but the average mortgage rate has dropped less than a tenth of a percentage point. The gap between the two rates is near its highest in more than seven years, according to an analysis by Dow Jones Market Data. The average 30-year fixed rate for a mortgage was 3.65 percent last week, according to mortgage company Freddie Mac. That is among the lowest average rates this year, but it has bounced up and down in recent months. Mortgage executives, traders and investors tend to watch the spread between the 10-year Treasury yield and the 30-year mortgage rate as a barometer of the mortgage market’s health. The spread blew out as the market imploded in 2008, when Treasury yields plummeted but lenders were slower to adjust mortgage rates. More recently, the difference has signaled that borrowers’ relatively strong appetite for mortgages is outpacing the industry’s ability to make them. Many lenders scaled back last year as mortgage demand dropped, so the current demand is stretching their capacity.
