Time to Refinance?

Is it time to refinance your mortgage?  Probably!

The rate on a 30-Year Mortgage has steadily dropped from already low rates. Although rates can vary by region and lender, the national average has dropped from  nearly 4.5% to under 3.5% over the last 6 months.

The drop in mortgage rates corresponds with a recent drop in the 10-Year Treasury Bond.  The market for these bonds does not directly effect mortgage rates, but it is good indicator of their direction.  In fact, movement of the 10-Year Treasury Bonds almost exactly mirrors movement of 30-Year Mortgage rates over the past 5 years:

As of February 24, 2020, the yield on the 10-Year Treasury bonds were near record lows.

Does this suggest record low mortgage rates?

Yes!  The current mortgage rates are already near record lows.

Will mortgages rates drop further (don’t they drop when the bonds drop)?

Not Necessarily.  Mortgage rates are not directly effected by bond rates — there are many factors that determine mortgage rates.  And, a drop in bond rates may reflect market conditions that are already “baked in” to current mortgage rates.

The recent precipitous drop in bonds may be largely a reaction to the coronavirus, and fears of its effects on the global economy.  Yet, those fears and the current bond yields at least hint at a continuation of low rates, if not a drop in rates.

Disclaimer – if we could predict where mortgage rates will go, we would be on a tropical beach, not writing this blog.  Rates could go up or down. Mortgage rates are already CRAZY LOW and its probably time to refinance if you haven’t already!