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Relationship between mortgage rates and long-term government security rates

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What is the general relationship between mortgage rates and long-term government security rates? Can you explain how mortgage lenders can be affected by interest rage movements. Also please explain how they can insulate against interest rate movements.

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Solution Summary

The general relationship between mortgage rates and long-term government security rates is determined.

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First, long-term government security is considered a risk-free investment. Second, in order for investors to invest in mortgage related securities which have higher risks than risk-free investments, ...

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