As predicted, the average HECM borrower will see their initial benefits decline by $2,750 (Tuesday the 5th). And next week looks as if it could be another decline in benefits. The 10-year LIBOR and Treasury markets are heating up.
On Sunday Ibis sent out an alert and noted that the FED reported rates seemed 4 basis points higher than market close rates, even though rates were rising. Here’s an update — note Friday’s rates in Red:
This week only Treasury-based HECM’s with a margin of +246 or less can pay the HECM maximum Principal Limit. Ditto for LIBOR-based HECM’s with margins of +239 or less. Current margins are higher than these figures. This week fixed-rate HECM’s range from 5.56% to 7.250%.
Using this week’s rates, the first table shows max rates or margins before the next drop in the Principal Limit factor. The percentage drops in the table are for a 74-year old borrower (the average HECM age). How to read the table:
- A 5.81% fixed-rate HECM gives 3.0% less than the max HECM benefit.
- A 3.00% margin HECM LIBOR gives 7.2% less than the max HECM benefit.
- A 3.50% margin HECM Treasury gives 12.8% less than the max HECM benefit.
So again this week a L+300 dominates a T+350 — it gives a 5.6% higher Principal Limit:
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