Sticky Mortgage Rates: Some Empirical Evidence

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Abstract
Mortgage rates have long been considered to be “sticky” rates compared to those on other capital market instruments. Using cross-spectral analysis and a more current mortgage market time series than previously available, the author documents 1) a well-functioning bond market with few lags and tight internal couplings, 2) a secondary mortgage market that appears to be fully integrated within the medium term capital markets, and 3) a primary mortgage market that evidences declining, yet persistently positive, lags behind bond market changes. Several institutional constraints are hypothesized to account for this seemingly inconsistent behavior.