Economic Conversation

I have known for quite some time that there is a strong relationship between daily mortgage rates and the 10 year treasury rate, but I could never find the actual equation.  Thanks to Subprime Blogger and Calculated Risk for the following equation that shows the relationship between the 30 year fixed rate mortgage and the 10 year treasury rate:

y = 2.7283(x)^2 + .5881(x) +.0308

As stated on Subprime Blogger, this equation shows that mortgage rates should be around 5.477% and the last time I checked they were at 5.35%.  Pretty close if you ask me as there is never a perfect correlation.  Just to start the conversation, do you use the trend of the 10 year treasury rate to determine where mortgage rates are going?  Do you even check mortgage rates on a consistent basis or just take the rate that is offered to you when you want to buy or refinance a house?

AUTHOR: Colin Keller

Daily mortgage rates have been very volatile over the last three weeks.  At the end of May, there were several days in which mortgage rates moved almost .5% in ONE day.  This is almost unheard of, but this is what happens when the government puts their hand in pot.  For the last two months, the Federal Reserve Bank has been buying up mortgage backed securities which pushed mortgage rates lower.  Had the government let free markets work, it is likely that mortgage rates would be a little bit higher but they would not be acting the way they have been for the last three weeks.

Do you think that President Obama and Ben Bernanke should continue to force mortgage rates lower?  Would it be better if they just let free markets work which would create the correct level for interest rates?