Why Isn’t the Thirty-Year Fixed-Rate Mortgage at 2.6 Percent?

Andreas Fuster and David Lucca

No 20121231, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: As of mid-December, the average thirty-year fixed-rate mortgage was near its historic low of about 3.3 percent, or half its level in August 2007 when financial turmoil began. However, yield declines in the mortgage-backed-securities (MBS) market, where bundles of mortgage loans are sold to investors, have been even more dramatic. In fact, all else equal, had these declines passed through to loan rates one-for-one, the average mortgage rate would now be around 2.6 percent. In this post, we summarize some of the findings from a workshop held at the New York Fed in early December aimed at better understanding the drivers behind the increased wedge between mortgage loan and MBS rates.

Keywords: Primary-Secondary Spread; Mortgages; MBS (search for similar items in EconPapers)
JEL-codes: G2 R3 (search for similar items in EconPapers)
Date: 2012-12-31
New Economics Papers: this item is included in nep-ure
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