Mortgage Rates Down Slightly After Last Month’s Increase

Mortgage rates have decreased by 6 basis points to 6.86% for the week ending October 6th, 2022. To simplify, for a $100,000 loan, the monthly payment DECREASED by $4 to $656/mo. or $0.14/day. WEEKLY Mortgage rates are available each THURSDAY.  Rates have been increasing as the Fed ramps up its efforts to address inflation concerns. In this upcoming week, items that impact Treasury and Mortgage Rates are the New Jobs report, which comes out Friday, October 7, 2022, the Unemployment Rate which comes out Friday, October 7, 2022, and the Producer Price Index, which comes out Wednesday, October 12, 2022.

Economic Release Dates

Lending Rates and Borrowing Costs

While mortgage rates DECREASED by 6 bps, the 10 Year Treasury rates INCREASED by 7 bps. The net difference is a 14 bps decrease in a spread of 303 bps. With the historical spread being 168 bps, there now exists a “safety cushion” of 135 bps above this historical spread. (See Chart Below)

10-Year US Treasury

As indicated in the chart below, the daily changes in the US 10-Year Treasury rates which are shown in blue, and the red line, indicate the 14-day cumulative change in rates; a 31-bps cumulative INCREASE. For the blue bars, it is unusual to have changes of greater than 0.10 in a single day and 0.20 is VERY unusual.

Historical Spread

In the chart below, the green line indicates the historic spread of 168 basis points between the 10 Year Treasury rates and mortgage rates. Currently, there are 149 bps above the historical norm. For this spread to return to the historical norm, either mortgage rates will decrease, or 10 Year Treasury rates will increase.

2022 Recent Yield Curve Changes

Rates for most terms were up this week. The Yield Curve for short terms remains steep while the longer term (5+ years) remains INVERTED.

Bill Knudson, Research Analyst Landco ARESC