Determinants of Mortgage Interest Rates: Treasuries versus Swaps

    Authors

    C. S. Sirmans; S. D. Smith;G. S. Sirmans

    Comments

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    Abbreviated Journal Title

    J. Real Estate Financ. Econ.

    Keywords

    Treasury rate; Mortgage rate determinants; Swap derivatives; LIBOR swap; rate; Business, Finance; Economics; Urban Studies

    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 Title

    Journal of Real Estate Finance and Economics

    Volume

    50

    Issue/Number

    1

    Publication Date

    1-1-2015

    Document Type

    Article

    Language

    English

    First Page

    34

    Last Page

    51

    WOS Identifier

    WOS:000348060400002

    ISSN

    0895-5638

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