What is the tie in between the 10 year treasury and mortgage rates?
Jim, the short, very simplified answer is that all of the interested parties in a mortgage transaction look to the treasury rates as a benchmark of value. There’s not a fixed relationship between the two, as mortgage rates will vary based on a number of factors. From a borrower’s point of view, the current treasury rate gives them a baseline to consider/compare rates among different lenders to determine whether a particular rate is competitive for their situation. Many (most) lenders will use the treasury rates as a benchmark for setting their rates with an eye towards reselling the mortgage to other investors, such as those who package mortgages into mortgage-back securites. For more detail (and much more organized), I’ll point you towards the HSH.com article I’ve linked to. I hope this helps!
