Mortgage Rates Gently Rising from Recent Lull

Mortgage Rates Gently Rising from Recent Lull Since 2006, mortgage interest rates have fallen 242 basis points, from 6.41 percent to 3.99 percent. A decline of 246 basis points in the 10-Year Treasury Note during the same period was largely responsible for the change. However, during the first two years of this period, from 2006 to 2008, the risk premium rose by 78 basis points. Michael Neal, writing in the National Association of Home Builders (NAHB) Eye on Housing blog, says it was this premium that was targeted by federal monetary policy and those policies were partly responsible for its decline. The current risk premium, 1.66 percent, is only 4 basis points higher than it was in 2006, before that spike. After nearly 12 years of low rates, often historically so, rates are on the move again. The Federal Housing Financing Agency's (FHFA's) data on purchase mortgages for newly constructed homes indicates there was a 7-basis point rate increase in November to 4.00 percent, still below the 4.18 percent peak recorded in February. Meanwhile, Freddie Mac posted a 2-basis point increase in its rate in November to 3.92 percent and another 3-basis point gain in December. Neal says that despite the differences, the two series track each other.