Will MTG rates drop when the Fed raises rates again? I think So

https://www.bankrate.com/mortg...

This is a great article which addresses the spread between the 10 year bond and the 30 year MTG rate.

Typically this spread is 1.5%-2%.  

Basically that means if the 10 year bond is at 2% then the 30 year Mtg should be 3.5% to 4%

Currently the 10 year bond is about 3.5% and the 30 yr mtg is 6.5% so there is a spread of 3% which is a lot more than the historical average.

WHY is this so?  

Most people believe it is the case because Markets are afraid due to volatility of things.

A lot of this is because people do not know what the FED is going to do.  

I firmly believe that once people and market see the FED moderating their Rate increases then this Spread will come back down from 3% to 2%

Basically if the Fed indicates that it is going to pause their rate hikes and keep rates steady things will go back to "NORMAL"

So what we could see is

• Federal Funds rate going from 4.25% to 4.5%
• 10 year bond going from 3.5% to 3.75%
• Spread between 10 yr bond and 30 yr mtg dropping from 3% to 2.5%
• so interest rates drop from 6.5% (3.5% +3% spread) to 6.25% (3.75% +2.5% spread)

And if markets calm further with the FED slowing or stopping interest rate hikes, that spread will reduce to 2% and 30 year MTG rates will drop even more