Mortgage rates took a beating last week. Even the most aggressive lenders are now creeping towards 5.00% (for WELL-QUALIFIED borrowers).

During the course of the holiday shortened work week, benchmark Treasury note yields rose persistently which lead mortgage backed security prices lower and forced lenders to offer even higher mortgage rates. I say “even higher” as a reminder of something that AQ has been writing all over Mortgage News Daily lately.

As always with Treasury auctions, supply is known in advance so market participants look at the demand for our nation’s debt to gauge its success or failure. Despite record amount of U.S. borrowing, demand for our nation’s debt has been quite strong all year, especially from foreign central banks, which has helped keep mortgage rates near historic low levels. If mortgage rates are to stop rising, we need foreign central bankers, China and Japan specifically, to continue providing support heading into 2010.