Sunday, September 7, 2014

Comparing 15-year FRM and 30-year FRM since 1999.




This post compares 15-year FRM and 30-year FRM rates, payments on 15-year FRM and 30-year FRM and 7-year mortgage pay down estimates for the 15-year and 30-year FRM.


Data for post:  


The source of data is Freddie Mac.


A link to an HTML version of the 30-year FRM rates


A link to an HTML version of the 15-year FRM rate


Note also this data can be downloaded in Excel files also.

Question One:  What are the average, standard deviation, skew, minimum, maximum, the range, the 25th and 75th percentile, and the interquartile range for the spread between the 15-year and 30-year FRM between January 1999 and July 2014?

Question Two:  What are the average, standard deviation, skew, minimum, maximum, the range, the 25th and 75th percentile, and the interquartile range for the difference in the monthly mortgage payment for the 15-year and 30-year FRM?  Assume the initial loan balance is $100,000.

Question Three:  What are the average, standard deviation, skew, minimum, maximum, the range, the 25th and 75th percentile, and the interquartile range for the difference in the reduction in the mortgage balance for a $100,000 15-year and 30-year FRM, which is held for exactly seven years?


Analysis:   The statistics on the rate differential in absolute terms and as a percent of the 30-year FRM rate are presented in the table below.




 Rate Information:

30-year FRM-15-year FRM
Diff as  percent of 30-Year FRM
Average
0.55
10.6%
Median
0.53
8.6%
STD
0.19
5.8%
Skew
0.50
82.8%
Min
0.25
3.3%
Max
0.98
23.2%
Range
0.73
19.9%
Q1
0.39
5.7%
Q3
0.68
13.2%
Interquartile Range
0.29
7.5%
Value July 2014
0.9
21.5%


The average 30-year versus 15-year FRM differential over this period was 0.55 percentage points with a range from 0.25 to 0.98 percentage points.



Right now the spread is large -- 0.9 percentage points.




Payment Differences:

30-year FRM-15-year FRM
Diff as percent of 30-Year FRM
Average
217.31
37.9%
Median
216.97
36.9%
STD
9.54
6.5%
Skew
-0.01
34.7%
Min
194.72
25.4%
Max
239.72
53.0%
Range
45.01
27.6%
Q1
209.98
33.6%
Q3
224.62
42.5%
Interquartile Range
14.65
8.9%
Value July 2014
217.2
44.8%


Naturally 15-year FRM payments are higher than 30-year FRM payments because you have a smaller period of time to pay off the mortgage.


The average monthly difference is  $217.  The range is around $45.

The payment differential in July 2014 is around the average.

Mortgage Pay down difference over 7 years. 


The median mortgage duration is around 7 years.  At this term the average difference in mortgage balance is around $26,300.   A person borrowing at July 2014 can expect a bit more equity build up.  



30-year FRM-15-year FRM
Average
$26,294
Median
$26,309
STD
$446
Skew
-0.1
Min
$25,204
Max
$27,204
Range
$2,000
Q1
$25,949
Q3
$26,618
Interquartile Range
$668
Value July 2014
$27,004





Some of the math behind these calculations was previously laid out in my mortgage math problem.





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