A brief excerpt:
From housing economist Tom Lawler:
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The most widely quoted statistic from the PMMS is the 30-year mortgage rate from the survey. Yet the survey also shows the typical/average fees/points associated with this interest rate, and these fees/points have changed dramatically over time. Below is a historical chart showing the fees/points charged along with the PMMS rate.
Click on graph for larger image.
As the chart shows, from the late 70’s to the late 90’s the average fees/points associated with the PMMS mortgage rate were substantially higher than has been the case over the last two decades. As such, the spread between the “effective” mortgage rate and the PMMS mortgage rate was considerably wider from the late 70’s to the late 90’s than has been than in the more recent decades.
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More on this topic later. However, the fact that nominal mortgage to 10-year Treasury spreads have widened considerably this year is not surprising given other developments in fixed-income markets, and there is no reason to expect that they will revert back to some “mean” level.
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