How Rates are Set

 Again, the California Association of Realtors is always sending us great information. The link below is no exception. Over the last few months, the Federal Reserve has reduced its key interest rate, the overnight LIBOR, to as low as 1 percent.  However, mortgage rates have not declined as dramatically.  One of the most commonly-followed indicators to determine where mortgage rates are headed is the yield on the 10-year United States Treasury note.  During economic downturns, mortgage rates and yields on 10-year U.S. Treasury tend to decline.  In recent months, the difference between the 10-year U.S. Treasury note and the 30-year, fixed-rate mortgage has been as high as 2.75 percentage points, largely due to lenders' attempts to recoup previous losses by incorporating a larger profit margin into the interest rate.  Click here for the full story.