Mortgage rates retreated last week, with the average conforming 30-year fixed mortgage rate falling 8 basis points to 6.66 percent, according to data released Thursday morning by Bankrate, Inc. (RATE). . The average 15-year fixed rate mortgage popular for refinancing dropped to 6.18 percent, while the average jumbo 30-year fixed rate is now 7.62 percent, according to the weekly survey published by the company. Adjustable mortgage rates were lower as well, with the average 1-year ARM inching back to 6.24 percent and the average 5/1 ARM down 8 basis points to 6.26 percent. Yet, even though mortgage rates declined this week, they remain nearly one full percentage point higher than expected, given the yield on benchmark Treasury yields. One year ago, when the credit crunch began, the average 30-year fixed mortgage rate was 6.58 percent. While that isn't much different than the average of 6.66 percent today, the yield on benchmark 10-year Treasury notes was considerably higher 12 months ago, at 4.7 percent. Now, the T-note yield is 3.79 percent. The spread between average mortgage rates and Treasury yields, which Bankrate pegged Thursday at roughly 280 basis points, is generally 100 basis points wider than it was one year ago. And to underscore the volatility here, UBS AG data shows that spreads between current-coupon 30-year fixed-rate mortgage securities and Treasuries had reached around 250 basis points earlier this week, after hitting 284 basis points in early March; the last time spreads were this high was more than a decade ago, when the spread peaked at 273 basis points on July 9, 1986. Which means that absolute mortgage rates matter little; the real cost of a mortgage is determined relative to Treasuries, and by that measure, mortgages have rarely been more costly for a consumer; ongoing turmoil at Fannie Mae (FNM) and Freddie Mac (FRE), not to mention a dearth of jumbo lending options, seems likely to further pressure spreads in months ahead. Meaning that irrespective of what mortgage rates do, the relative cost of a mortgage seems likely to remain quite high for some time; and if the Fed is forced to bump its federal funds target rate in the months ahead, as some economists now feel is likely, it seems likely that mortgage rates will rise further as well. At least, that's the conventional wisdom; but with the market doing what it's now doing, that sort of logic seems to be in very short supply. For more information, visit Disclosure: The author was long FRE and held no other positions in companies mentioned when this story was published; indirect holdings may exist via mutual fund investments, as well. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.