As mortgage rates come off their near-record lows, fewer property owners are interested in refinancing home loans. That's according to the Mortgage Bankers Association's most recent mortgage application survey, which reported a 17 percent drop in its refinancing index for the week ending October 16. The slide in refinancing applications is linked to an uptick in mortgage rates. Thirty-year, fixed mortgage rates inched marginally higher, to 5.07 percent, from 5.02 percent the previous week.
[Check out Mortgage Rates Seen Below 6% Through 2010]
Rates have been nudged higher by bond investors, who have demanded moderately higher yields on 10-year Treasury notes. Ten-year Treasury yields fell to 3.21 percent on October 7—the lowest they had been since early summer. By Tuesday, however, yields had crept back up to 3.41 percent, according to HSH.com. (Fixed mortgage rates tend to track the yields on 10-year Treasuries.)
So why are 10-year Treasury yields moving higher? Keith Gumbinger of HSH.com says investors are slowly becoming less risk averse. As such, they are now more willing to take money out of ultra-safe assets—like U.S. government debt—and put it to work in more aggressive investments such as stocks, oil, or gold. "That money has to go someplace," Gumbinger says. "And you are probably not going to want it to be stuffed into 100-percent guaranteed Treasuries because they don't yield much."
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