Mortgage Rates Continue to Decrease

For the week ending 7.7.22 Mortgage rates decreased 43 bps to 5.50%. For a $100,000 loan the monthly payment decreased $27 to $568/mo. or $19/day.

30 Year Mortgage Rates

While mortgage rates decreased, 10 Year Treasury rates Increased 3 bps. This caused the net spread to decrease 46 bps to 81bp ABOVE the normal spread of 168bp. This is a LARGE decrease of the “cushion”.

Lending Rates and Borrowing Costs

The historic spread (aka difference) between the 10 Year Treasury and mortgage rates is 168 bps (see green line). This past week the 10 Year Increased 3 bps while Mortgage rates decreased 43 bps, thus a 46 bps decrease in spread occurred and the spread went from 127 bps to 81 bps above the historical norm. Given how quickly rates have recently risen, pricing personnel is going to want to “retain this cushion” to be safe against unexpected rate increases. To have a change of 46 bps in the “cushion” is material.

Rate Vs. Spread

Bill Knudson, Research Analyst Landco ARESC