Mortgage rates unlikely to hit record lows

A flight to safety and belief that the Fed will cut rates have driven the 10-year Treasury yield to record lows. But we doubt the 30-year mortgage rate will follow suit. Stretched lender capacity and increased caution will act to widen the spread against the 10-year yield. As a result, we expect the 30-year mortgage rate will drop to around 3.6% over the next couple of weeks, 10bps above its 2012 low.