(TheBasisPoint.com) -- Technical analysis of the 30-year Treasury future indicates that we are at the end of the secular bull market for Treasuries and that yields are headed higher for the next 12-15 months. This implies that home loan rates have already hit their bottom. Home loan rates are no going to skyrocket. They will have their ups and downs but the point is that we are not going to get back to that 1.43% yield on the 10 year Note.
At present there are a couple of unusual things about the relationship between home loan rates and Treasuries:
(1) the Fed is buying home loan debt which will support home loans relative to Treasuries, and
(2) the wholesale markup — the profit that banks are making by selling home loans to FNMA — is, by historical standards, gigantic. If one of the big banks wants to get aggressive and lower their markup to get market share, this would help. While this is the way markets are supposed to work, the problem is that the regulations pursuant to Dodd-Frank have made lenders afraid to make loans.
The core issue is that CFPB still hasn’t defined what lenders must do to make sure that they do not have to buy mortgages back. A sane lending institution might well decide that it does not want a larger share of a problem. The political and social climate remains antagonistic to lending.
If you were thinking of refinancing, it’s unlikely that rates will fall to their recent lows. Regard this as a last call.
It looks as if this is not the end of low rates but it is the end of very low rates.