The 10-year Treasury went down to 3.41% today. The FED’s 10-year CMT data begins in 1962. Below is a plot of weekly averages thru today. Over these 46.7 years, the 10-year CMT has averaged 6.99%.
The record low was 3.20% for the week ending June 13, 2003. The low Treasury rates of mid-2003 are what prompted HUD to change the Expected Rate’s minimum lookup to 5.50% when finding HECM Principal Limit Factors. The HECM program began in the Fall of 1989 — during the 20-year HECM period, the 10-year CMT has averaged 5.75%.
The 10-year Swap Rate was down to 3.99% yesterday. So expect Treasury HECM margins to soon rise to 2.00% and LIBOR HECM’s to 1.50%. Both products would give the maximum payouts given the 5.50% lookup floor.
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Article written by Jerry Wagner & Ibis Reverse Mortgage Software – The Industry Standard Since 1995.
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I think it would be wise for lenders and brokers to wait for a while before moving all of there production from the 175 up to the 200 or higher. With the way the markets are fluctuating, rates may very well go back up and the customers are in for a shock of their 200 suddently reduces their principal limit.
Observer made note of it:
http://www.reversemortgageobserver.com/20080921/as-the-10-year-t-bill-falls-lenders-increase-their-hecm-margins/