Homeowners are rushing to refi mortgages as rates drop

Debt investors are now turning to Treasury bonds for revenue to offset the surge in refinancings

National /
Mar.March 27, 2019 12:39 PM

Large money managers are buying Treasuries and interest rate swaps in an effort to offset lost income from mortgages. (Credit: iStock)

Homeowners throughout the country are looking to refinance their mortgages thanks to lower borrowing costs, contributing to a sharp government bond rally.

The recent bump in refinancings means investors who own the debt might soon see their loans paid back in full. So now, some large money managers are buying Treasuries and interest rate swaps in an effort to offset lost income from mortgages, the Financial Times reported.

Applications to refinance home loans increased by roughly 12 percent last week compared to the week before, according to data from the Mortgage Bankers Association.

This has worsened the recent government bond rally, analysts and investors told the FT, with 10-year yields dropping about 38 points since the beginning of March.

Real estate investment trusts are especially interested in hedging since their liabilities do not fluctuate with interest rates the same way their mortgage loans do.

The lurch downward in Treasury yields should lessen along with the need to hedge mortgage portfolios, but as the Fed winds down its holdings of mortgage-backed securities, the phenomenon could spike back up. [FT] – Eddie Small


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)
Real estate stocks push up this week as U.S.-China trade tensions ease
Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Compass CEO Robert Reffkin (iStock, Getty/Illustration by Kevin Rebong for The Real Deal)
How much Compass paid to scale up
How much Compass paid to scale up
Houston House at 298 East 2nd Street and Matt Lee (Houston House, LinkedIn)
Developer Matt Lee to auction off East Village condo
Developer Matt Lee to auction off East Village condo
Michael Stern and Walker Tower unit 15B (JDS, Google Maps)
Michael Stern’s Walker Tower pad sells for 24% under ask
Michael Stern’s Walker Tower pad sells for 24% under ask
Homebuilding is largely responsible for the increase in construction spending. (Getty / Photo Illustration for The Real Deal)
Construction spending hits new record in January
Construction spending hits new record in January
A Columbus Circle apartment once owned by Tom Brady and Gisele Bundchen  went into contract last week, helping the Manhattan luxury home market finish February on a high note. 551 West 21st Street on the right. (Photos via Compass, Getty, Foster and Partners)
Manhattan luxury market has best month in six years
Manhattan luxury market has best month in six years
(iStock/Illustration by Kevin Rebong for The Real Deal)
These are real estate executives’ worst worries for 2021
These are real estate executives’ worst worries for 2021
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...