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The Knudson File: Do Interest Rates Really Matter? 

One month ago, mortgage rates were ~4.00% and income needed to qualify for a $100,000 loan was $20,500.  Now, with rates at 5.31% $23,800 is needed.  This is an increase of 15% which is a major impact on first time home buyers qualifying for a loan. 

Mortgages are up 11 basis points while 10-Year US Treasuries up 7 bps, thus the spread increased 4 bps to 241 bps or 73 bps ABOVE the 168 bps average.  The mortgage market is pricing in future rate increases by the Fed.  The next Fed meeting will be on MAY 4th, which is 12 days away.

Note: May 1st ARM’s are 3.83% about 150 bps below 30 year, maybe a good time to look at an ARM if a home purchase is at risk.

30-Year Mortgage Rates

As of: 4/21/2022 Week change: 0.11%

MORTGAGE RATES ARE NOW WELL ABOVE 5.00% and increased 11 bps to 5.31%. For a $100,000 loan the monthly payment increased by $7 to $556 which is equal to $0.23 a day.

Spread Between Mortgage and Treasury

The historic spread (aka difference) between the 10 Year Treasury and mortgage rates is 168 bps (see green line). At the start of 2022 mortgage rates have increased FASTER than the 10-year Treasury. This past week the 10 Year rose 7 bps while Mortgage rates increased 11 bps thus their spread increased 4 bps and now stand at 73 bps above historical norm.

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