Are Mortgage Rates about to rise?
In normal times, the 30-year Fixed Rate Mortgage (FRM) is priced based upon the extra yield investors require over and above that which can be received on the US 10-year Treasury Note (10T). In recent years that extra yield – spread – has averaged 1.7%.
2020, as you may have noticed, has not been normal. In the peak of the disruption to mortgage markets in April the spread reached 2.7%, as the yield on 10T was driven sharply lower, dropping from 1.8% at the beginning of the year to as low as 0.55%.
But recently, the yield has been climbing and now approaches 1%. And the spread over 10T has been under 2% for the last three weeks.
The FRM I use for my calculations is the rate in the Freddie Mac weekly national survey of lenders. This is published on Thursdays and is based on rates in the Monday-Wednesday period. I suspect there will be a small uptick in the survey rate published tomorrow and that, if the higher yield on 10T is sustained, there will be a larger increase next week.
I will publish an article on the 2021 outlook for mortgage rates this coming Saturday.
Market Analyst | Team Harborside | teamharborside.com
Sagan Harborside Sotheby’s International Realty
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