Narrowing The Rate Spread

From the Washington Times:

Specifically, Fannie and Freddie purchase mortgage loans from banks, package the loans into mortgage-backed securities and sell them to individual and institutional investors. My column two weeks ago predicted that mortgage rates would subsequently fall. The demand for mortgage-backed securities should increase the price of these securities, which would lower the yield, reducing interest rates.
Indeed, mortgage rates did fall significantly on the Monday after the Fed’s announcement of the bailout. Rates on 30-year fixed mortgages fell about three-eighths of a percent – a huge one-day drop.
Since the mortgage meltdown, it’s no secret that mortgage-backed securities have been out of favor with investors. Let’s compare the 10-year Treasury yield with the rate offered on my oft-touted zero-closing-cost, 30-year fixed-rate mortgage for a refinance. The spread between the Treasury yield and mortgage rates is three-quarters percent to 1 percent higher than it used to be.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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