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Determinants of Mortgage Interest Rates: Treasuries versus Swaps

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  • C. Sirmans
  • Stanley Smith
  • G. Sirmans

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. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • C. Sirmans & Stanley Smith & G. Sirmans, 2015. "Determinants of Mortgage Interest Rates: Treasuries versus Swaps," The Journal of Real Estate Finance and Economics, Springer, vol. 50(1), pages 34-51, January.
    • Handle: RePEc:kap:jrefec:v:50:y:2015:i:1:p:34-51
    DOI: 10.1007/s11146-013-9445-9
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    References listed on IDEAS

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    Cited by:

    1. Gang Wang, 2019. "The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach," IJFS, MDPI, vol. 7(1), pages 1-30, February.

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