Every word of the film, for reading instead of watching.
Nobody sets your mortgage rate. No bank president picks a number. It's priced by a market, and it moves every single day. Here's the machine.
Start with the 10 year Treasury. When the U.S. government borrows money for ten years, the interest it pays is the closest thing the world has to a reference price of money.
Safe, liquid, and the benchmark every other loan gets measured against. Your mortgage is also a long term loan — bundled with thousands of others and sold to the same investors who buy Treasuries. And while a mortgage says thirty years on paper, most only live about ten — people move, people refinance. So the ten year is the yardstick.
When it moves, mortgage rates move with it, usually the same day. But mortgages always price above the Treasury — and the gap is the risk. Lend to the government, you get paid, period. Lend to a homeowner, two things can happen: they can miss payments, and the moment rates drop, they can refinance and hand your money back early.
Investors charge for both. Historically that premium runs about one point seven. Through twenty twenty three it stretched near three. So what moves the ten year?
Anything that changes what a dollar is worth tomorrow. Inflation reports. Fed decisions. Jobs numbers.
Hot inflation makes future dollars worth less, investors demand more yield, rates climb. Cool data does the opposite. And it moves fast. January twenty twenty two: three point two two.
By October: seven point oh eight — more than doubled in ten months. October twenty twenty three: seven seven nine, a twenty three year high. Nine weeks later: six six one. And on one hot inflation morning, rate sheets reprice before lunch.
That's your rate: the world's biggest bond market, plus a risk premium, repriced every morning. You can't watch it all day. I do.