Capacity issues may be keeping rates from dropping below 3%.
Mortgage rates fell to an all-time low in the last week, and lenders across the country are now dealing with a deluge of mortgage applications as borrowers rush to both buy and refinance.
But are some of those same lenders keeping borrowers from getting even lower interest rates than they already are?
The answer: Possibly.
The mortgage business is clearly in uncharted waters now, with interest rates falling below 3.3% for the first time ever.
The yield on the benchmark 10-year U.S. Treasury note continues to fall every day to new record lows, and mortgage rates typically track with the 10-year Treasury. As of Friday afternoon, the yield on the 10-year Treasury was roughly 0.76%, but it had never fallen below 1.1% as recently as last week.
Given the typical spread between the 10-year Treasury and mortgage rates, borrowers should be able to get an interest rate in the neighborhood of 2.75%, or perhaps even lower than that.
But that’s not happening, at least not across the board.
Why? Because it appears that some lenders are trying to protect themselves from being crushed by demand.
Put simply, there is only so much volume that mortgage companies can handle. Some can handle more than others, depending on their size and technological capabilities. But others are already being stretched thin by the surging demand.
