From the Big Picture.
1. Increased competitive pressures amongst the nation’s lenders
2. Surplus capacity in mortgage lending services sector
3. Financial innovation in the form of new mortgage products
4. Improved pricing efficiencies in pricing these new, and existing, mortgage contracts
5. Improved marking-to-market pricing of duration risk of mortgage contracts, towards the 5-year sector of the Treasury Note/Swaps curve, and away from the 10-Year sector of those curves
6. Moderating core consumer inflation pressures in 2006 and beyond
7. The back-up in the 10-year Treasury Note yield is likely capped below 4.5% over the next three years, and that yield could fall to as low as 3.0% during the next recession (in 4.0 years).
For better or worse, the free markets may be what leads the way …
