Mortgage Rates Update: March 23rd, 2023
Headline: Mortgage rates decreased by 18bp and the 10-year Treasury rates happened to decrease by the same amount Spreads have now increased to 327bp. While not a record, the last time spreads got this large was November 2022 and mortgage rates feathered down 100bp over the following 12 weeks.
The Fed increased rates by 25bp at their 3.22.23 meeting. Their next meeting is 5.2.23 On 4.12.23 the CPI data for March will be released. It is envisioned the annual CPI will decrease from the current 6.0% level to ~5.2% because the March 2022 spike due to Russia's invasion will fall out of the 12-month rolling CPI calc.
For the week ending 3.23.23 Mortgage rates DECREASED 18bp to 6.65%.
For a $100,000 loan, the monthly payment DECREASED $12 to $642/mo or $0.40/day
While mortgage rates DECREASED by 18bp , 10 Year Treasury rates DECREASED by 18bp. The net difference resulted in an increase of 0bp in the spread to 327bp. With the historical spread being 168 there now exists a “safety cushion” of 159bp above the historical spread.
The historic spread between the 10 Year Treasury and mortgage rates is 168pb (see green line, right axis) and currently, there is a 159bp above the historical norm. For this spread to return to the historical norm, either mortgage rates will decrease further or 10 Year Treasury rates will increase. The last time spreads were this large, mortgage rates feathered down 100bp over the following 12 weeks.