Broker Check
5568 General Washington Drive
Suite A-217
Alexandria, VA 22312-2465
Office: (703) 813-5551
Toll Free: (800) 445-5595
Fax: (703) 813-6170
Mortgage Rates Fall to Record Low

Mortgage Rates Fall to Record Low

| July 01, 2020

Economic Blog

Nearly four months ago, in late February, the 10-year Treasury yield broke to its lowest level ever, undercutting the record lows from 2016 of 1.32%. Over the following two weeks, as fears surrounding the COVID-19 pandemic intensified, interest rates experienced an unprecedented collapse, with the yield on the 10-year Treasury note eventually trading as low as 0.31% on March 9 (Bloomberg). However, consumers who rushed to refinance loans in mid-March may have been surprised to find that mortgage rates, which typically track the path of longer-term Treasury rates, actually spiked significantly during that time.

So what happened? Well, as stress appeared in nearly every funding market in the world, the average spread, or additional yield relative to risk-free rates, that investors demanded for mortgage-backed securities (MBS) expanded significantly, more than offsetting the decline in longer-term Treasury yields. Since then, as the Federal Reserve (Fed) has stepped in to support numerous areas of the market, including renewing MBS purchases, MBS spreads have declined, while Treasury yields have remained low.

As shown in the LPL Chart of the Day, this confluence of events sent the average rate on a 30-year fixed rate mortgage to its lowest level ever on Friday, at just 3.30%.

View enlarged chart.

“Low mortgage rates may be here for a while,” said LPL Financial Senior Market Strategist Ryan Detrick. “Fed buying is supportive, and spreads remain attractive relative to other quantitative easing periods, which could provide some cushion in the event that Treasury yields rise in the second half of the year.”

For fixed income investors, MBS remains one of our preferred areas for diversification in portfolios, a topic we explored in more depth last month.


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC.

Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

  • Not Insured by FDIC/NCUA or Any Other Government Agency
  • Not Bank/Credit Union Guaranteed
  • Not Bank/Credit Union Deposits or Obligations
  • May Lose Value

For Public Use – Tracking 1-05027811