A mortgage broker explains why higher interest rates might actually lower mortgage rates. The 10-year treasury yield drives mortgage pricing, and when yields rise, investors get more attractive returns, which can ease pressure on home loan costs.
The cure for higher rates might just be higher rates. Here's what I mean by that. You might have heard me talk about the 10 year treasury yield. This is the rate of return when buying treasury bonds, which is the US Government's debt. It's one of the more safe investments out there. Now for comparison's sake, during COVID years, the US 10 year treasury was at 0.6%. Not much rate of return. It's now at 4.6%. It's a lot more juice there. It's right in line with money market accounts and other investments. So you might see investors start funneling money in. During COVID years, the US Government was funneling a ton of money in. That's what made the bond market strong and mortgage rates low. If we see investors start moving more money into safe investments, which might happen because the economy is a little shaky right now, that will help mortgage rates. So the fact that the 10 year treasury rate is high will attract more investors which will actually push mortgage rates lower. Keep a lookout for this.
