For the week ending 7.7.22 Mortgage rates decreased 43bp to 5.50%. For a $100,000 loan, the monthly payment decreased $27 to $568/mo or $19/day.
While mortgage rates decreased, 10 Year Treasury rates Increased by 3bp. This caused the net spread to decrease from 46bp to 81bp ABOVE the normal spread of 168bp. This is a LARGE decrease of the “cushion”.
The historic spread (aka difference) between the 10 Year Treasury and mortgage rates is 168pb (see green line). This past week the 10 Year Increased 3bp while Mortgage rates decreased 43bp, thus a 46bp decrease in spread occurred and the spread went from 127bp to 81bp above the historical norm. Given how quickly rates have recently risen, pricing personnel are going to want to “retain this cushion” to be safe against unexpected rate increases. To have a change of 46bp in the “cushion” is material.