Home Mortgage Rates Are High Relative To Treasuries

Image Source : Unsplash The Wide Spread Between Home Mortgage Rates And Treasuries: Causes And Future Trends

[{"selector":"#anim-955e982a-83a7-43f3-8c9e-ab01239bfd15 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate(0%, 0%) scale(1.5)","translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] [{"selector":"#anim-a317a739-13f4-436b-882b-e61453b1776f","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-8c0863bf-9f6a-4cd5-b794-4bf2dcdc3340","keyframes":{"transform":["translate3d(0px, 186.70036%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash The interest rate on home mortgages is currently much higher than the interest rate on long-term treasury bonds.

[{"selector":"#anim-bac33d15-c407-4441-934a-fc373e3da6f4 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(-28.88175074293542%, 0, 0) translate(-25%, 0%) scale(1.5)","translate3d(0%, 0, 0) translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"fill":"forwards"}] [{"selector":"#anim-1c32371c-d80f-4a40-b11b-bf892106e52c","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-a1a46989-5428-40d3-9570-0392a66108ed","keyframes":{"transform":["translate3d(0px, 221.74939%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash Mortgage industry professionals are wondering if the spread will return to normal.

[{"selector":"#anim-eb524e8e-3f0a-45af-810c-074439a07838 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate(0%, 0%) scale(1.5)","translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] [{"selector":"#anim-698affc6-9f23-4a3e-a849-23b1ab2edc56","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-95c280ee-159a-4ef6-a4c6-68ec3e38868a","keyframes":{"transform":["translate3d(0px, 185.40634%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash The spread is wide by historical standards, with the average spread over all available data at 1.69 percentage points before the pandemic.

[{"selector":"#anim-70793b4f-9453-4c72-80e1-1eb09214abef [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(-9.82008501195714%, 0, 0) translate(-25%, 0%) scale(1.5)","translate3d(0%, 0, 0) translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"fill":"forwards"}] [{"selector":"#anim-b4fea80b-efa7-44b5-96af-7574ad420325","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-9f038a3d-5524-4670-aa58-a44c934c1ed4","keyframes":{"transform":["translate3d(0px, 166.53746%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash The difference between the interest rates on 10-year treasury bonds and the average 30-year fixed rate mortgage was right at the long-term average of 1.69% in February 2019.

[{"selector":"#anim-a5368fd2-d49c-4c0b-9850-8d0827d013bb [data-leaf-element=\"true\"]","keyframes":{"transform":["translate(3.552713678800501e-15%, 0%) scale(1.5)","translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] [{"selector":"#anim-b92a8341-7d78-4a54-9b08-d0633431ee8f","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-2035590a-8d81-4e9f-81f5-c59d7f28ab71","keyframes":{"transform":["translate3d(0px, 185.40634%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash Mortgage originators sell loans to government-sponsored entities such as Fannie Mae or Freddie Mac and are paid for this service.

[{"selector":"#anim-0ebd5b1b-8106-4b15-9b8c-8d6d14eb3376 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(-31.08020687096516%, 0, 0) translate(-25%, 0%) scale(1.5)","translate3d(0%, 0, 0) translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"fill":"forwards"}] [{"selector":"#anim-5971f06a-c7ba-4775-b8b5-49816b855b13","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-e469f62a-88ce-4703-a4f4-5c3cebfd17d6","keyframes":{"transform":["translate3d(0px, 185.40634%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash When Fannie or Freddie sells a bundle of mortgages to investors, the interest rate is based on supply and demand.

[{"selector":"#anim-a5dd9f88-13b8-49c6-8302-62e70bc05dfc [data-leaf-element=\"true\"]","keyframes":{"transform":["translate(-3.552713678800501e-15%, 0%) scale(1.5)","translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] [{"selector":"#anim-c0c6cc72-7025-4af2-8eaf-1db2c00b73fc","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-b7c27353-aa3b-4844-884b-5d5d8221a013","keyframes":{"transform":["translate3d(0px, 154.49736%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash Homeowners have the option to refinance when mortgage rates drop, which means that when interest rates drop, homeowners refinance, and investors are left with cash they have to reinvest at new, low-interest rates.

[{"selector":"#anim-73564888-039a-45f2-9a9c-213df6596bca [data-leaf-element=\"true\"]","keyframes":{"transform":["translate(-3.552713678800501e-15%, 0%) scale(1.5)","translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] [{"selector":"#anim-d5be1bd1-d729-4553-95f0-aa181ef2abc0","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-db9a14a1-6ce3-4f8a-9b79-6c613ae00972","keyframes":{"transform":["translate3d(0px, 166.53746%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash Mortgage-backed securities become an inferior investment option for investors because of the option for homeowners to refinance their mortgages.

[{"selector":"#anim-288df81e-f7fb-4bb5-af86-b01fd6116e06 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(-7.816274911816028%, 0, 0) translate(-25%, 0%) scale(1.5)","translate3d(0%, 0, 0) translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"fill":"forwards"}] [{"selector":"#anim-4eb6b034-32be-4b3a-b9cd-b1891564e4c0","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d93f0b65-3549-47d8-8b49-3041e8c00e6a","keyframes":{"transform":["translate3d(0px, 185.40634%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash The total spread between mortgage rates and treasury bonds widened a good bit in the first half of 2020.

[{"selector":"#anim-e07edb93-c0cb-4960-8686-d6ca61ad6d26 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate(-3.552713678800501e-15%, 0%) scale(1.5)","translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] [{"selector":"#anim-68817baf-e928-4c8a-9df4-48e0c0e7b7dc","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-ca3f7220-299d-4fd7-b091-1c510741d095","keyframes":{"transform":["translate3d(0px, 185.40634%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash The wide total spread between mortgage rates and treasury bonds in early 2023 seems to be due to the wholesale level.

[{"selector":"#anim-a76ed57c-85e7-4e05-9087-317a46630e0f [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(-7.812499744007886%, 0, 0) translate(-25%, 0%) scale(1.5)","translate3d(0%, 0, 0) translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"fill":"forwards"}] [{"selector":"#anim-756e15d2-e718-4c72-a44c-7bd34b91053b","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-530c8cfb-3e9f-4478-a177-8d9f6555ff8f","keyframes":{"transform":["translate3d(0px, 185.40634%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash The volatility of mortgage rates doubled over the last 52 weeks compared to the preceding 52 weeks.

[{"selector":"#anim-fb74031a-50b8-4ab3-8fd3-77b0866d4d83 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate(0%, 0%) scale(1.5)","translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] [{"selector":"#anim-257b7e55-f39d-4f0b-a809-4f7474cbb92b","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-a553957e-f552-4fc3-9b4c-cfc7ba6bf1aa","keyframes":{"transform":["translate3d(0px, 221.74939%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash The key factor for the spread returning to normal will be when interest rates stabilize.

[{"selector":"#anim-9541b627-8087-4ba3-97ee-e8c8ee572604 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(-31.249999886225726%, 0, 0) translate(-25%, 0%) scale(1.5)","translate3d(0%, 0, 0) translate(0%, 0%) scale(1)"]},"delay":0,"duration":2000,"fill":"forwards"}] [{"selector":"#anim-e3c7cf87-3049-4a43-8e66-b8e12582aa51","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-7003516c-e3d7-4eb1-aef1-2fdfc92d2da1","keyframes":{"transform":["translate3d(0px, 185.40634%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Image Source : Unsplash Mortgage rates will likely decline gradually starting early in 2024 and continuing for two years or so.