The economy is picking up. Americans return to travel, eat out, go to the movies and play ball.
But if you’ve been expecting a strong recovery to lead to a steep rise in mortgage rates, think again.
On Thursday, 10-year Treasury rates (a carefully watched indicator and a major benchmark for mortgage rates) fell below 1.46%. Prior to the recent pullback, government bond yields reached 1.69% in May.
The drop in Treasury yields came after new reports showed the US trade deficit had reached record highs. For mortgage borrowers, lower Treasury yields can lead to lower mortgage rates. Typically, the 10-year Treasury is 150-200 basis points above the 30-year mortgage rate.
Greg McBride, chief financial analyst at Bankrate, said: “One day, drops in Treasury yields mean lenders often change prices that day and borrowers get better rates within hours. Treasury yields are falling. Now is a good time for borrowers to set interest rates early in the week. “
Mortgage buyer Freddie Mac said Thursday the 30-year average interest rate fell from 2.99% last week to 2.96%.
Interest rates on 15-year loans, which are popular for refinancing mortgages, fell from 2.27% last week to 2.23%.
According to the Ministry of Labor, consumer prices rose the fastest since 2008 in May, according to the latest economic news. The consumer price index in May rose 5% year on year.
Another inflation index, which excludes volatile food and energy costs, rose 3.8% year-on-year, the fastest pace since 1992.
In addition, the government announced last week that the number of Americans claiming unemployment benefits fell to 376,000 for the sixth week in a row. This is the lowest value for a new pandemic.
Sam Carter, chief economist for Freddie Mac, said: “But house prices have not yet weakened as prices remain high due to the shortage of inventory.”
The reversal of Treasury yields is just the latest ball of the curve launched by the economy. Mortgage experts expect mortgage rates to continue rising this year, said Joel Narov, director of Narov Economics.
“There is little reason for government bonds to drop,” Narov said. “Inflation has not gone away, growth is strong and the economy has just started to fully recover. Treasury interest rates are expected to recover, so lower mortgage rates may be temporary. “
What you can do to ensure a smooth and profitable refinancing
Mortgage rates have risen from their all-time lows set in January, but there is still time to refinance mortgages. Here are three professional tips:
• Shop: the best offer goes to the borrower to compare mortgage offers. You can save thousands of dollars over the life of your loan by getting at least three quotes.
• Consider rate freezes: Lenders typically extend rate freezes for 30 to 60 days. This means that if the rate goes up before the loan ends, you no longer have to pay. However, these are not normal times and many refinances don’t end within 30-60 days, so make sure your lender is prepared to extend the rate freeze if the transaction is delayed.
• Keep your credit score tight: Now is not the time to miss a payment, take on new debt, or do anything else to lower your credit score. Lenders are particularly strict on the credit history of the borrower.
Bankrate, The New York Times, The Associated Press contributed to this report.
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