The gap between U.S. consumer mortgage rates and Treasury yields is widening, leading to bolstered profits for banks and missed opportunities for savings among homeowners.
Investors have retreated to U.S. government bonds as a safe haven, which lowered the yields on 10-year Treasury notes, according to the Financial Times. Mortgage rates have not dropped, which means a large profit for banks.
The 10-year Treasury yield is at 1.45 percent while 30-year mortgage rates sit at 3.70 percent, according to Financial Times. That’s compared to a 3.20 percent yield on 10-year U.S. Treasury yield and a 4.6 percent 30-year mortgage in 2011.
“Household mortgage rates usually lag sharp downward moves in Treasury and mortgage securities,” Gerald Lucas, senior investment advisor at Deutsche Bank, told Financial Times. “Banks can only originate so many loans and higher credit standards mean it’s harder for some borrowers to qualify for new loans.”
Lucas also told Financial Times that he believed Treasury yields would have to stay lower for an “extended period” to enable banks to lower their mortgage rates.
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