Determinants of Mortgage Interest Rates: Treasuries versus Swaps
Abbreviated Journal Title
J. Real Estate Financ. Econ.
Treasury rate; Mortgage rate determinants; Swap derivatives; LIBOR swap; rate; Business, Finance; Economics; Urban Studies
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 of Real Estate Finance and Economics
"Determinants of Mortgage Interest Rates: Treasuries versus Swaps" (2015). Faculty Bibliography 2010s. 6804.