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A spread is the difference between two interest rates.
From a lender’s perspective, the most important “spread” is the difference between the mortgage rate they offer consumers, and their cost for those funds.
Other spreads include:
- The fixed – variable rate spread
- The 5-year fixed – 5-year bond yield spread (a rough gauge of lender margin on fixed-rate mortgages)
- The variable – BA spread (a rough gauge of lender margin on variable-rate mortgages)