Several lenders dropped their 5-year fixed mortgage rates this week by 0.05% to 0.10%. That’s thanks to falling bond yields, which are hovering near 7-month lows.
It’s a little surprising rates aren’t lower, however. Last time bond yields were this low, posted 5-year fixed rates were 0.75% lower than they are today.
In addition to the typical slowness in which lenders lower rates, today’s higher rates are also reflective of ongoing subprime concerns. The credit market is still building an abnormal amount of risk premium into mortgage rates.
Maybe what’s abnormal is not the current risk premium but the almost complete disregard for risk up until this point, at least if the US experience is any guide. I know, I know, it’s “different” here. I wonder if we’ll be singing that same tune in another year or two.