U.S. homebuyers can’t get a break.
Not that much.
So investors generally demand a premium above Treasury yields when buying mortgage-backed securities to compensate for this prepayment risk. Otherwise, they would be stuck with a return lower than they initially expected when they bought that loan.
Last, there’s an important historical perspective that’s often missing from discussions about today’s mortgage market.
That’s why mortgage rates aren’t determined solely by the Fed but by millions of investors making judgments about the future. And at the moment, those investors remain cautious.
