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Bob Said:

Can someone explain in laymen's terms how mortgage rates are set by the 10 year treasury yield?

We Answered:

They are used because they have such a long time line. 10 year and 30 year bonds. At one time the 30 year bond and mortgage were paired. Then 30 year bonds were discontinued. So everyone used the 10 year.

US Treasury bonds are the safest investment in the world. Everything else is more risky. So a home mortgage might be 4.5% when the 10 year bond is 3%. The difference is the "risk premium". An investor is positive he will get his money back in 10 years with the bond. He is less certain with the mortgage. So he demands more interest for more risk.

Rene Said:

What affect will the government bailout have on future mortgage rates?

We Answered:

You should be able to get a lock with a float down option. That is, you can protect yourself from rising rates by "capping" your rate. If rates are lower once the house is substantially complete, you can float down to the market 30-60 days prior to closing.

No one can say what will happen with rates with any certainty except they will change. However, it stands to reason that the rates should get better because now the Fed is explicitly guaranteeing Freddie and Fannie obligations so the yields on those securities (which drive retail rates) should fall until they are approximately equally to Treasury securities of the same maturity. At present, there is a 1% difference in the yields. The markets should adjust until that spread is substantially reduced. Otherwise, a smart investor would prefer mortgage backed securities over Treasuries as they have a higher return with no additional risk.

For some reason, the markets have not reacted fully to this change, but that may be because the bailout is still up in the air. Freddie and Fannie assets are not the toxic assets involved in the bailout generally speaking, but they have lost favor with Foreign investors in particular since the crisis began.

In short, you may not need to worry about what will happen with rates provided your rate lock allows you the option to float down once the home is nearly complete.

Good luck.

Jacqueline Said:

What is the largest site for published mortgage rates?

We Answered:

Probably not.
Most sites, Including bankrate use rates offered by many lenders.
And although they are all in the ball park, might differ a bit.
I do this for a living. If you want a feed, you may be stuck picking one you trust, else you can get historical data from some FNMA, or government sites. But not streaming daily or hourly data.