Despite rising government bond yields, it’s still a good time to buy or refinance a home.
On March 12, US 10-year Treasury yields hit their highest level in over a year. It did so immediately after President Biden signed a comprehensive signature $ 1.9 trillion coronavirus relief bill and announce that states are expected to make large-scale vaccines available by May 1st. For government bond investors, higher returns mean more money. However, a higher yield on government bonds could also have an impact Mortgage rates – and not good.
The link between 10 year treasury and mortgage rates
Many of us are familiar with corporate bonds – the kind of companies that raise money for things like product research and development. Treasury bonds are issued by the US government and are pretty much the safest investment you can make. The 10-year government bond is just one of several bonds in this category.
What makes the 10-year Treasury Department so significant, however, is that its rate of return (the rate of return you get when you invest in bonds) tends to affect mortgage rates. When the rate of return rises, mortgage rates usually follow. Now, the 10-year Treasury Department isn’t the only factor affecting mortgage rates. Other factors are the inflation rate, the unemployment rate and additional economic measures. But as 10-year government bond yields rise, so too could mortgage rates, on top of the increases we’ve seen in recent weeks.
Should you rush to buy or refinance a mortgage?
Mortgage rates are much higher today than they were a month ago. But they are much lower today than they were a year ago.
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Interest rates have been at record lows at several points over the past year, and while they are no longer currently, interest rates today are still reasonably competitive. This also applies to mortgages Refinancing rates. So, if you’re looking to buy a home or refinance an existing mortgage, don’t let the recent leaps scare you – you can still do pretty well in today’s mortgage rate environment.
However, we do not know whether or at what rate mortgage rates will continue to rise over the course of the year. Last year there were many predictions that mortgage rates would remain largely constant through 2021, but this was before significant advances were made on the coronavirus vaccine front and before a massive stimulus bill was incorporated into law and made official. While these developments are extremely positive in and of themselves, they could push mortgage rates higher in the months ahead. So, if home ownership or refinancing is on your radar, it might be worth getting started sooner rather than later.
Of course, there are steps you can take to get the lowest mortgage or refinance rate available. That includes making sure you have a good credit score (or you are working too fast Give your credit score a boost If not), keep your non-mortgage debt to a minimum and secure a stable source of income for yourself. When you buy a mortgage, you also increase your chances of getting the lowest possible interest rate. So do not hesitate to look for offers from several Mortgage lender before moving forward with one.