Why Home Mortgage Rates Are High Relative To Treasuries—And When They Will Fall

The option for homeowners to refinance their mortgages makes mortgage-backed securities an inferior investment option. So investors will buy them only if they offer a premium over treasury bond interest rates. That is the wholesale mortgage spread.

At the retail level, some spread widening would be expected due to the mortgage originator’s interest rate risk. The borrower gets an interest rate quote, but then walks away if rates fall, leaving the first originator in the lurch. But if interest rates rise, that borrower holds the originator to the quote. In a more volatile interest rate environment, both spreads increase.

They will not fall in this year for sure. Maybe after 18 months.

They better fall humans are restless

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