A lot of borrowers can’t believe they aren’t being offered juicy discounts off prime rate anymore. Well, believe it. Lenders are getting absolutely pounded on variable-rate mortgage spreads.
Bankers’ acceptance rates (which influence the cost of funds for variable-rate mortgages) have skyrocketed. As a result, the spread between prime rate and bankers’ acceptance yields (ie. the lender’s profit margin) has dwindled to 61% of what it normally is.
Check out this chart. It shows how variable rate spreads have basically fallen off a cliff.
Not long ago, you could get a nice 3/4%+ discount on a variable-rate mortgage. Not anymore. Unless this spread improves fast it’s possible lenders may start charging a PREMIUM to prime rate for variable-rate mortgages.
As noted last week, if you want a variable-rate mortgage, get’em while the gettings good. There are a handful of lenders still offering better than prime.
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