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Mortgage rates bounce up

By Polyana da Costa ·
Wednesday, September 28, 2011
Posted: 9 am ET

Mortgage rates have bounced back from their record lows last week.

After the Fed announced plans last Wednesday to implement Operation Twist and buy $400 billion in long-term securities, many in the mortgage industry expected rates to fall. They tumbled. But the party was short-lived.

The yields on 10-year Treasury notes and on Freddie Mac bonds -- which are the main benchmarks for mortgage rates -- have climbed this week. The Freddie Mac yield is 3.48 percent this morning. That's a 56 basis point jump compared to Thursday, the day after the Fed announcement. The 10-year Treasury yield has increased from 1.71 percent to 2.01 percent over the same time.

Lenders acted quickly and followed the trend, raising rates on mortgages.

Weren't rates supposed to fall to new lows after the Fed's announcement? In theory they were. But the Fed's theories don't always work well in practice. Plus, the Fed doesn't control the global markets, which influence mortgage rates more than you might think.

Rates have climbed in part because of speculation that the Group of 20 leaders, the G-20, will do whatever it takes to get Europe's debt crisis under control. There are also signs that Greece may be close to persuading lawmakers to grant the country a second bailout.

"Investors seem to be gaining more confidence in the stock market," says Rob Nunziata, president of FBC Mortgage in Orlando, Fla. "So it appears institutional investors are selling lower risk bonds positions and moving into the stock market.  Good news for stocks, bad news for rates."

That said, if you missed last week's record low rates, there is no need to panic. Mortgage rates remain near the bottom.

Follow me on Twitter @Polyanad

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