Mortgage / Treasury Spread

• November 4, 2022
• realestatelife
• Announcements, Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate Finance, Recession, Your Real Estate Life

The average mortgage rate should be around 6% today and not 7% if the normal spread is applied. A monthly mortgage payment of $1,799 versus $1,996 on a $300,000 loan.

Historically the spread between 10-year Treasury bond yields and 30-year mortgage is 170 basis points. Today it is over 300 basis points. The only other brief times when the spread widened outside the normal was when people sought and bought 10-year Treasury bonds in massive quantities as a safe haven during a financial market shock meltdown in 2008-2009 and in early months of COVID. Today’s large spread is happening at a time of rising Treasury yield. The Federal Reserve will be doing at least two more rounds of rate increase in November and early next year. But as in the past the 10-year bond traders already know this and have priced that in.