By Jeff Ostrowski
That economy reopens. Americans are traveling back, eating out and going to cinemas and ball games. But if you expected the strong recovery to lead to a rapid rise in the mortgage rate, think again.
The rate on ten-year treasury bonds – an accurate benchmark and a key benchmark for mortgage rates – fell below 1.46 percent on Thursday. Prior to the recent retreat, yields on government bonds rose to 1.69 percent in May.
The drop in treasury yields comes after a new report shows that the US trade deficit reached record levels. For mortgage lenders, the decline in treasury yields could likely amount to a decline in the mortgage rate. As a rule of thumb, the Treasury holds 150 to 200 basis points higher than the thirty-year mortgage loan rate for ten years.
“The response in mortgage rates to movements in the Treasury’s underlying returns tends to be fairly immediate,” said Gregrate Chief Financial Officer Greg McBride. ‘A setback in treasury yields a day means that lenders change the price of day and that borrowers get better rates within hours. With Treasury yields starting this week, it’s a good time for borrowers to close their rates. ”
The reversal of treasury yields is just the latest curve that the economy is throwing. Mortgage experts expect the interest rate to continue to climb this year – and any decline in Treasury yields could be fleeting, said Joel Naroff, head of Naroff Economics.
“There’s really little reason for the decline in Treasurys,” Naroff said. “Inflation is not disappearing, growth is strong and the economy is just starting to fully recover. I expect a setback in treasury rates, so the mortgage rate declines are likely to be temporary. ”
What you can do to ensure a smooth and profitable refinancing.
Mortgage rates have risen from the lows set in January, but there is still time to refinance your mortgage. Here are three tips:
Shop: the best deals are for lenders comparing mortgage deals. By getting at least three quotes, you can save thousands of dollars over the life of the loan.
Consider a rate lock: Lenders usually extend an interest rate lock to 30 to 60 days, which means you do not have to pay more if the rates rise before you take out a loan. However, these are not normal times, and many refinances do not close within 30 to 60 days. So make sure your money lender is willing to extend your rate lock if your transaction is delayed.
-Keep your credit score strict: this is not the time to miss a payment, incur new debt or do anything else to lower your credit score. Lenders are particularly strict about credit history of borrowers.
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