The 10 year treasury rate can greatly assist in making a correct mortgage rates forecast. There is a very strong correlation between the 30 year fixed mortgage rate and the 10 year treasury rate. If you notice one heading in a strong direction one way, it is likely the other will follow.
The 10 year treasury rate is a strong predictor of mortgage rates. The correlation of the 10 year to the 30 year fixed mortgage is over quite strong. If you look at a graph of the two indicators together, you will see that over 90% of the time they move together. With this knowledge, it makes it much easier to give a solid mortgage rates forecast.
Since the beginning of 2009, the 10 year has been in a steady uptrend from 2% all the way to 4%. There was a very strong resistance at 4% and the 10 year rate has pulled all the way back down to 3.5%. It would not be surprising to see it fall back down to the 3.25% before we see the uptrend find any ground again. The government is trying very hard to make sure that mortgage rates get to 4.5% but it seems that they might not have enough power to push the 10 year low enough to pull mortgage rates that low.
It will be very interesting to see how Obama and Benanke attack this issue as mortgage rate are going to have to be extremely low to get the housing market back in gear. If the low mortgage rates of March and April did not help to put a bottom in the housing market, there is absolutely no way that the rates of today, around 5.4%, are going to assist at all. Americans are already concerned enough about the housing market, the last thing we need to see if rates pushing towards 6%. Overall, making a mortgage rates forecast is going to be tough, but watching the 10 year treasury rate might help out.
