Determinants Of Mortgage Interest Rates: Treasuries Versus Swaps

Keywords

LIBOR swap rate; Mortgage rate determinants; Swap derivatives; Treasury rate

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.

Publication Date

1-1-2015

Publication Title

Journal of Real Estate Finance and Economics

Volume

50

Issue

1

Number of Pages

34-51

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1007/s11146-013-9445-9

Socpus ID

84921284066 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84921284066

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