Widening Out the Yield Curve
A snap back in the market today has taken the fixed rate mortgage programs back closer to the highs of their recent range. What is interesting though is that rates on short term programs are getting back to very attractive spreads when compared to the benchmark 30 year fixed rate mortgage.
It's been quite awhile since we've seen this widening spread in the yield curve (the plotting of short term to long term rates). A few years in fact.
Here's a snapshot of what I am talking about for current rates:
- 1 year Treasury ARM at 3.875%
- 5/1 Treasury ARM at 5.00%
- 30 year fixed rate at 5.875%
If are willing to take some risk you can get two points lower on that 1 year product right now. The 5/1 ARM is becoming an attractive program again and should at least go into the decision making process for many people.
As the Fed continues to cut expect this widening to expand.
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