{"id":260122,"date":"2024-09-18T23:29:46","date_gmt":"2024-09-18T23:29:46","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2024\/09\/18\/where-will-mortgage-rates-go\/"},"modified":"2025-06-25T17:11:15","modified_gmt":"2025-06-25T17:11:15","slug":"where-will-mortgage-rates-go","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2024\/09\/18\/where-will-mortgage-rates-go\/","title":{"rendered":"Where Will Mortgage Rates Go?"},"content":{"rendered":"<p> [ad_1]<br \/>\n<\/p>\n<div id=\"post-53803\">\n\t\t\t\t<!-- .entry-header --><\/p>\n<div class=\"entry-content\">\n<p>Ad hoc time series analysis.<\/p>\n<p><a href=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/30yrmortage_10yrTrsy_pix18sep24.png\"><img fetchpriority=\"high\" fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-full wp-image-53804\" src=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/30yrmortage_10yrTrsy_pix18sep24.png\" alt=\"\" width=\"1140\" height=\"450\" srcset=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/30yrmortage_10yrTrsy_pix18sep24.png 1140w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/30yrmortage_10yrTrsy_pix18sep24-300x118.png 300w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/30yrmortage_10yrTrsy_pix18sep24-1024x404.png 1024w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/30yrmortage_10yrTrsy_pix18sep24-768x303.png 768w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/30yrmortage_10yrTrsy_pix18sep24-624x246.png 624w\" sizes=\"(max-width: 1140px) 100vw, 1140px\"\/><\/a><\/p>\n<p>The 30 year mortgage rate and 10 year Treasury constant maturity yield comove over the past 8 years. A Johansen maximum likelihood test (constant in cointegrating equation, in VAR, 4 lags of differences) rejects the no\u00a0 cointegration null using the Trace statistic (also only 1 cointegrating vector, so both series might be stationary) over the 1986-2024M08 period.<\/p>\n<p>The null hypothesis of (1 -1) cointegrating vector is not rejected (point estimates (1 -1.02).<\/p>\n<p>Using a single equation error correction model (imposing homogeneity) yields:<\/p>\n<p><a href=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgagerates.png\"><img decoding=\"async\" class=\"alignnone size-full wp-image-53806\" src=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgagerates.png\" alt=\"\" width=\"447\" height=\"351\" srcset=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgagerates.png 447w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgagerates-300x236.png 300w\" sizes=\"(max-width: 447px) 100vw, 447px\"\/><\/a><\/p>\n<p>These estimates indicate mortgage rates are about 7 ppts above 10 year Treasurys. A one percentage point reduction in the 10 year yield results in a 0.75 percentage point reduction in mortgage rates upon impact (here, in month). Deviations from equilibrium have a half live of about 4.5 years.<\/p>\n<p>The relationship is subject to structural breaks, as indicated by recursive one-step ahead Chow tests, particularly around September 2022.<\/p>\n<p><a href=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgage_recursive.png\"><img decoding=\"async\" class=\"alignnone size-full wp-image-53805\" src=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgage_recursive.png\" alt=\"\" width=\"849\" height=\"532\" srcset=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgage_recursive.png 849w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgage_recursive-300x188.png 300w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgage_recursive-768x481.png 768w, https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/09\/seecm_mortgage_recursive-624x391.png 624w\" sizes=\"(max-width: 849px) 100vw, 849px\"\/><\/a><\/p>\n<p><em><strong>Figure 1:<\/strong> Probability for recursive Chow one-step ahead test for no break (left scale), recursive residuals (right scale). NBER defined peak-to-trough recession dates shaded gray.<\/em><\/p>\n<p>If 100 bps reduction in the Fed funds rate (currently the talk for end-of-year) results in about 30 bps reduction in the ten year, this implies about 23 bps reduction in mortgage rates by year\u2019s end (ballpark!).<\/p>\n<\/p><\/div>\n<p><!-- .entry-content --><\/p>\n<footer class=\"entry-meta\">\n\t\t\tThis entry was posted on <a href=\"https:\/\/econbrowser.com\/archives\/2024\/09\/where-will-mortgage-rates-go\" title=\"2:54 pm\" rel=\"bookmark\"><time class=\"entry-date\" datetime=\"2024-09-18T14:54:41-07:00\">September 18, 2024<\/time><\/a><span class=\"by-author\"> by <span class=\"author vcard\"><a class=\"url fn n\" href=\"https:\/\/econbrowser.com\/archives\/author\/menzie_chinn\" title=\"View all posts by Menzie Chinn\" rel=\"author\">Menzie Chinn<\/a><\/span><\/span>.\t\t\t\t\t\t\t\t<\/footer>\n<p><!-- .entry-meta -->\n\t<\/div>\n<p>[ad_2]<br \/>\n<br \/><a href=\"https:\/\/econbrowser.com\/archives\/2024\/09\/where-will-mortgage-rates-go\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>[ad_1] Ad hoc time series analysis. The 30 year mortgage rate and 10 year Treasury constant maturity yield comove over the past 8 years. A<\/p>\n","protected":false},"author":1,"featured_media":260123,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[155],"tags":[],"_links":{"self":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/posts\/260122"}],"collection":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/comments?post=260122"}],"version-history":[{"count":0,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/posts\/260122\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/media\/260123"}],"wp:attachment":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/media?parent=260122"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/categories?post=260122"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/tags?post=260122"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}