Placeholder Image

Subtitles section Play video

  • Welcome to Charts that Count.

  • There are no upsides to a global health crisis.

  • But the coronavirus, if nothing else,

  • has made debt cheaper to bear, throwing

  • a lifeline to borrowers at a time

  • of incredible financial stress.

  • Acute worries about future growth,

  • abetted by an aggressive programme of bond buying

  • by the US Federal Reserve, has driven the yield on the US

  • 10-year Treasury down to just over half a per cent.

  • Other forms of debt caught in the same gravitational field

  • are getting cheaper too.

  • But who benefits?

  • Yes, governments and companies can borrow more cheaply.

  • But what about human beings?

  • Perhaps the most important way that lower rates

  • helps consumers and families is through lower-priced mortgages.

  • And indeed, the average rate on the US 30-year fixed rate

  • mortgage has fallen to 3.5 per cent, by historical standards

  • a very cheap mortgage.

  • One that any homeowner could brag

  • about at a backyard barbecue, if we're ever

  • going to have those again.

  • Look, however, at that little spike in mortgage rates just

  • after the Covid crisis began.

  • Investors, spooked by the idea that homeowners

  • would default on their mortgages,

  • lost their appetite for mortgage debt.

  • That left mortgage lenders with no place

  • to sell newly originated mortgages to.

  • Mortgage prices spiked and the market

  • clogged, prompting the Fed to step in and buy

  • mortgage bonds directly.

  • That seemed to work, bringing mortgage prices down.

  • But let's look closer.

  • This last chart shows the difference

  • between the 30-year mortgage rate and the 10-year Treasury.

  • This spread, as it is known, usually

  • hovers at around 1.5 to 2 percentage points.

  • This week, it stands at 3 per cent.

  • In other words, mortgages are not cheap, not cheap at all

  • given where government debt is trading.

  • If the Fed wants consumers to get

  • the full benefit of low interest rates,

  • it still has more work to do.

Welcome to Charts that Count.

Subtitles and vocabulary

Operation of videos Adjust the video here to display the subtitles

B1 INT US FinancialTimes mortgage debt cent cheaper cheap

Why mortgages are not cheaper Charts that Count

  • 5 1
    洪子雯   posted on 2020/05/02
Video vocabulary