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NAR joined CHLA and ICBA in urging the NEC and Treasury along with the Fed and FHFA to address short-term issues that have led to unnecessarily high rates. NAR also urged action to support long-term liquidity in MBS market. This effort is the second this week to address the sharp increase in mortgage rates.
The gap between the 30-year fixed rate mortgage and 10-year Treasury is normally about 1.5%. Currently it is now closer to 3%. This 1.5% extra gap reflects inefficiencies in the market, but in particular the Fed's attempt to reduce its holding of MBS when there are few/no buyers to replace it. This decline demand causes rates to go up relative to Treasuries.
Simultaneously several factors have reduced demand for MBS that could be a long-term issue. Under GSE reform, the GSEs' portfolios are limited to minimal sizes. Thus, a second major source of demand is gone. Compounding this is that banks tend not to want to buy mortgages or MBS in rising rate environments and that some are actually selling them due to financial strain (e.g. Silicon Valley Bank). All this has resulted in drain on demand is pressing up on mortgage rates relative to Treasuries.