Mortgage Backed Securities Vs Mortgage Rates

A blog featuring up to the minute commentary on mortgage rates and the mortgage backed securites markets.

Mortgage backed securities vs mortgage rates.

They are always trying to guess when you might payoff your current mortgage. A discussion of mortgage backed securities and their affect on mortgage rates. This risk can be reduced by diversifying the maturities and characteristics of mortgage backed investments. How mortgage backed securities affect interest rates mbs are affected by the same types of economic and market factors as bonds with one exception.

A common misconception is that mortgage rates are set by the federal reserve. This is known as negative convexity and is one reason why mbss offer higher yields than u s. That s not true rates follow prices for mortgage backed securities mbs. In turn their prices tend to decrease at an increasing rate when rates are rising.

However mortgage backed securities prices tend to increase at a decreasing rate when bond rates are falling.