Released: August 31, 2008

Greater risk, higher mortgage rates

Source: Jamie Smith Hopkins, Baltimore Sun (Free Registration)

Mortgage rates aren’t what they used to be - and not just because they’re higher.

You can normally predict the going rate for a 30-year fixed mortgage by looking at the yield on 10-year Treasury notes. If the yield is 3.8 percent, as it was in the middle of this month, you’d expect mortgage rates would be a bit less than 5.5 percent. Instead, they were hovering around 6.5 percent.

As Treasury yields dropped earlier in the summer, in fact, mortgage rates stayed steady or even rose. Joseph Bell, a Wonk reader who’s thinking of buying a house, wonders: “Is there any reason for this?”

Yes.

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