The week's rate outlook
Wednesday, March 10
Written 10:15 a.m. EST
RATE OUTLOOK: Today is the day of Bankrate's weekly rate survey. It looks like mortgage rates will be almost unchanged from last week, when the 30-year fixed averaged 5.12 percent.
This mini rate forecast is clouded by something unexpected happening in the bond markets. Yields on 10-year Treasuries are rising this week, while yields on mortgage bonds have stayed pretty much the same. This is the opposite of what I expected to happen in the last few weeks of the Fed's mortgage-buying program.
Four years ago, the rate on the 30-year fixed was 1.72 percentage points higher than the yield on the 10-year Treasury. Last week the difference was 1.49 percentage points, and that will probably narrow even more this week. Eventually, I think that difference will snap back to where it used to be. When that happens, the rate on the 30-year fixed will be 1.75 percentage points to 2 percentage points higher than the yield on the 10-year Treasury.
And that means higher mortgage rates. Many bond-market observers predict that mortgage rates will be half a percentage point higher at the end of the year than they are now. That seems about right, and maybe on the low side. The 30-year fixed is likely to rise to 6 percent or higher sometime this year, after loitering in the low 5s for much of the last 12 months.
Read more mortgage blogs.