Rising Mortgage Rates Feeding into Strength for 'MORT'

The threat of rising mortgage rates might not sound appealing to prospective homeowners, but it could embolden the VanEck Vectors Mortgage REIT Income ETF (MORT).

Mortgage rates are still at relatively low lows.

“Although still-rising mortgage rates aren’t at the record lows we saw from December through February, they are still much lower than we’ve witnessed historically,” a Fox Business article said. “Purchasing a home for rates as low as 3% is a deal that was practically unheard of in the past. As homes are selling within residential real estate, home buyers can still lock in favorable rates within the hottest housing markets.”

MORT seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Mortgage REITs Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index.

The Mortgage REITs Index may include small-, medium-, and large-capitalization companies. The fund has a net expense ratio of 0.41%.

MORT gives the discerning ETF investor access to:

  • High Dividend Yield Potential: In recent years, yields from mortgage REITs have been higher than those of equity REITs and many income-oriented securities.
  • Pure Mortgage REIT Exposure: The fund tracks an index that offers pure play exposure to mortgage REITs.
  • An Industry in Transition: Mortgage REITs may potentially stand to benefit from the evolving mortgage finance market, but are sensitive to interest rate and regulatory changes.

MORT Chart

Rates Are Still Attractive

As mentioned, rates are still at an attractive level given historical standards. The below chart from macrotrends.net shows how rates have fallen over a 40-plus year span.

As Mortgage Rates Increase, Here's a REIT to Consider 1

“The economy is on the road to recovery after the pandemic, and housing market predictions are that mortgage rates are expected to continue to rise over the next year,” the Fox Business article added. “According to the Mortgage Banker’s Association, a 30-year fixed-rate mortgage will likely reach 3.4% by the fourth quarter of 2021.”

“However, even if rates rise to the highest forecasted level, this is still an incredibly attractive rate for most borrowers,” the article continued. “The housing boom is likely to continue, with the only real disadvantage being the limits on housing inventory.”

For more news and information, visit the Beyond Basic Beta Channel.