Determinants of Mortgage Interest Rates: Treasuries versus Swaps

Determinants of Mortgage Interest Rates: Treasuries versus Swaps The 10-year Treasury rate has long been considered the primary determinant of 30-year mortgage interest rates. The contemporaneous 10-year LIBOR swap rate is shown to better explain the contemporaneous mortgage rate than the contemporaneous 10-year Treasury rate. This result appears to hold over most of the sample period, 1987–2011, using a variety of statistical tests. Given the long-held belief that the mortgage rate is best explained by the 10-year Treasury rate, this paper makes an important contribution to the literature by demonstrating that the swap rate is superior. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Determinants of Mortgage Interest Rates: Treasuries versus Swaps

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Publisher
Springer Journals
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-013-9445-9
Publisher site
See Article on Publisher Site

Abstract

The 10-year Treasury rate has long been considered the primary determinant of 30-year mortgage interest rates. The contemporaneous 10-year LIBOR swap rate is shown to better explain the contemporaneous mortgage rate than the contemporaneous 10-year Treasury rate. This result appears to hold over most of the sample period, 1987–2011, using a variety of statistical tests. Given the long-held belief that the mortgage rate is best explained by the 10-year Treasury rate, this paper makes an important contribution to the literature by demonstrating that the swap rate is superior.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Oct 1, 2013

References

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