The lurking mortgage spread crisis

Plus: A "big plan" for social security, childcare woes and more [  Advertiser disclosure]( [View in browser  ]( [Bankrate®]( A mortgage spread isn't something you put on toast. Instead, it's one of the key factors fueling mortgage affordability for Americans — and a possible economic indicator to watch in the next few weeks. From lawmaker's latest plan to fund Social Security to the secret cities where living might just be easy. Read it here only on the Bankrate Brief. The widening mortgage rate spread and what it means for the economy I can't believe it's not just the Fed rate [alt goes here]( It's no mystery why mortgage rates are rising -- the Fed is raising interest rates, so mortgage rates have to follow, right? Not quite. There's another culprit behind skyrocketing mortgage interest: the gap between 30-year mortgage rates and their closest proxy, the 10-year Treasury yield, also known as "[the spread]( While a healthy gap between rates and the yield is nothing to panic over, this past year has seen something a little weirder – as of May 24, the average 30-year rate in Bankrate’s rate survey was 6.84 percent, but the 10-year yield was just 3.7 percent. The gap had widened to 3.14 percentage points – the highest level since 2009, when the [global economy was in meltdown](. The big numbers: • Earlier in January 2022, the average rate on a 30-year mortgage was 3.75 percent, according to [Bankrate’s national survey of lenders](. The 10-year Treasury, meanwhile, was yielding 1.83 percent, meaning the spread was 1.92 percentage points. • The spread at the beginning of the COVID-19 pandemic – March 11, 2020 was around 3.01 percentage points. The spread at the peak of the 2008 economic crash – December 31, 2008 – [was 3.46 percentage points](. • A "normal" spread at 2 percentage points for mortgage rates wouldn't be 6.84 percent, [but 5.7 percent](. • In mid-November 2021, the average rate on a 30-year fixed loan was just 3.15 percent. By late October 2022, that number had soared to 7.12 percent – which may be [contributing to the wideness]( of the spread. The big impact: The Treasury yield is determined by multiple factors and is often used as a pulse point by economic experts to get an idea of America's financial health. Post-pandemic inflation, as well as fears of a recession and the ongoing debt ceiling debates are [fueling economic uncertainty]( which is causing the yield to bounce lower. The spread is also contributing to the [housing affordability crisis](. If current rates were closer to 5.7 percent, a borrower with a $300,000 mortgage would be looking at a monthly payment of $1,741. At 6.84 percent, that payment would be $1,964, or $223 more. Where do we go from here? While some factors contributing to the spread -- such as the [debt ceiling talks]( -- are predicted to be resolved within the week, others will take longer to play out. The Fed is predicted to [raise rates]( at least once more this year, with their next meeting slated for June 13-14. In the meantime, it's never a bad idea to bulk up your emergency fund, pay off your debt and start bolstering your budget for a potential downturn. Greg’s take “The debt ceiling brinksmanship — or worse — seems likely to take what is already an abnormally wide spread and expand it further.” [Greg McBride, Greg McBride, Bankrate chief financial analyst]( Lawmakers’ “big idea” for Social Security Will Congress defuse the ticking time bomb? [alt goes here]( Lawmakers have until 2034 until full Social Security benefits run out. While cutting benefits or changing the retirement age may help stymie the issue, Senator Bill Cassidy, (R-LA) has another idea -- investing in stocks, the returns of which can cover about 75 percent of the fund’s 70-year projected shortfall. That's the theory, at least. [Here's why it might just work](. Quick bite: In 2035, the Social Security Administration predicts there will only be 2.3 workers supporting each beneficiary. Lower birth rates and an aging population are contributing to a smaller workforce paying Social Security taxes. [Learn why]( this might lead to a financial disaster. [Read article]( Quiz: Which of the following is not a type of cryptocurrency? A.   Bitcoin B.   Matrixium C.   Dogecoin D.   Tron Check out the answer at the end of this week’s edition! The rising child care cost crunch Where's Mary Poppins when you need her? [alt goes here]( Child care is often the most expensive part of raising kids today, and it's only getting worse. Home care, daycare, after school care, nannies and sitters are all crucial for working families to keep their kids safe, but the cost is rapidly outpacing inflation, putting parents in an impossible position as they struggle to find care. Check out the breakdown from Bankrate and learn where you can [save on child care](. Quick bite: The average family spends $850 on child care per month. Small wonder, then, that 52 percent of parents find themselves spending over a fifth of their income on their kids' care. Here's why it's [only going to get worse](. [Read article]( News in a nutshell Got investments? Here are seven critical [mistakes you might be making](. When the economy is out, the side hustle is in. Check out [14 ways to make extra money]( during a recession. If you have student loans, you shouldn't just be watching the Supreme Court rulings. Learn why the [debt ceiling impacts]( student loans, big time. Did you know? Your credit card can help you fight inflation. Bonuses like cash back and spending rewards like airline miles get you more bang for your buck – and with rising prices, you can earn more and take the sting out of spending. [Here’s how](. America's top 10 hidden gems Places you never thought you'd live -- but will want to [alt goes here]( What do Omaha, Huntsville, Champaign, Des Moines and Green Bay have to do with one another? They're all affordable, diverse and rapidly growing cities in the United States – and they might just be your next destination. If you're looking to make a move, check out Bankrate's [exclusive picks for places]( to live. Quick bite: The Midwest is becoming a hotspot for affordable mortgages and rents. With rising interest rates, having a smaller home loan can exponentially affect how much you're paying in interest. See what Midwest cities [might be for you](. [Read article]( Quiz answer: B. Bitcoin, Dogecoin and Tron are all real -- and are three of the most popular types of cryptocurrency to invest in right now. Check out Bankrate's lineup to [see what your crypto investment]( options are. Getty Image illustrations are used for editorial purposes in this newsletter. Below is credit to contributors: • Aksakalko/Getty Images • DNY59/Getty Images • athima tongloom/Getty Images • Monte Goodyk/Getty Images [fb]( [insta]( [in]( [tw]( [yt]( [tiktok]( © 2023 Bankrate, LLC. All Rights Reserved. Bankrate, LLC • 16 45 Palm Beach Lakes Boul evard • Su ite 12 00 • West Palm Beach, FL 33401 You received this update at {EMAIL} because you have a Bankrate account. You may unsubscribe from this email [here](. View our [privacy policy](.