What historical lows and what they can mean for you
Friday – June 28, 2013As we have seen over the past couple of weeks, the stock market and bond markets have been reacting wildly to the change in interest rates. If we take pause however, and let cooler heads prevail, we will realize where we are from a broader historical perspective. Sure maybe you can’t get a 3.5% 25 year loan anymore, but did any of us really think that those absurdly low interest rates would last for much longer. A quick glance at the graph of 10 year US Treasury rates, a barometer for the mortgage market, and you’ll quickly realize that rates are still pretty close to historical lows. In fact Treasury rates could rise another full point or two and we would still be on the low side of historical range.
How do US Treasury rates relate to mortgage rates? Well, keep in mind that banks work on a spread between their cost of funds and what they charge you. Sometimes that spread can expand and sometimes squeeze tighter. Generally speaking you will find your long term mortgage rates to be about 250-350 basis point higher than the 10 year Treasuries rate. In other words if the Treasuries are at 2.5%, then you would typically expect mortgage rates around 5%, in rough numbers
Source: US Treasury
Dougall McCorkle, MBA
Sales Associate and Commercial Specialist
Premier Commercial, Inc., Licensed Real Estate Brokers
Direct: 239.213.7234
Cell: 239.860.3368
dougall@premiermail.net