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Treasury Bond Market This Week rose to the level we haven’t seen since March 2020 – and economists expect a hike in mortgage rates may be on the horizon.
“When long-term Treasury yields start to rise, it will put upward pressure on fixed-rate mortgage rates,” said Frank Notaft, chief economist at real estate data firm Corelogic.
Treasury yields have seen strong gains over the past month, which continued last week as the 10-year and 30-year Treasuries nearly hit pre-pandemic levels. The increased likelihood of an increase in government spending, which experts predict will give a much needed boost to the economy, is one factor that will play a role.
“The support that we expect to receive from the current administration … it will help many households in financial distress,” says an economist at the Mortgage Bankers’ Association. Joel Kahn… “This will drive growth – and any growth we are going to get will put upward pressure on rates.”
Late last week, the Biden administration’s $ 1.9 trillion stimulus package overcame the hurdle to approval by both the House of Representatives and the Senate. approval of budget decisions… This allows the Senate, led by Democrats, to approve the measure with a simple majority.
Optimism is high, with Treasury Secretary Janet Yellen saying it expects the US to return to full employment by next year if the stimulus package is passed.
“This is good news. It is also likely to increase inflation slightly,” Notaft says. Inflation is one of the main factors affecting long-term Treasury yields and mortgage rateswhich tend to move in tandem. “[The change in mortgage rates] not everything happens overnight, it is a gradual process as we get more information over time. “
Here’s how it all can affect your future plans for getting a mortgage or refinancing your existing home loan.
Mortgage rates are expected to rise – and this will interfere with your refinancing plans
Mortgage rates bottomed out late last year and have gradually started to rise since then. Many expect mortgage rates to continue to rise this year.
“Our forecast [has mortgage rates] will grow to about 3.4% by the end of the fourth quarter of 2021, ”says an economist at the Mortgage Bankers Association. Joel Kahn… “The reason we have an increasing trajectory is due to expectations of stronger growth in the second half of the year.”
The current economic uncertainty is keeping mortgage rates from rising sharply. Last Job Report Bureau of Labor Statistics showed a slight decrease in the unemployment rate, to 6.3% in January. This figure is based on the fact that more than 10 million people are unemployed.
Raising mortgage rates will likely have a larger impact on your refinancing plans than whether you can afford to buy a home. There are other factors that strongly influence the home buying process, for example, the seller’s market in which we operate.
“Historically, rates have never interfered with transactions,” says Kahn. “When it comes to such an important decision, [home buyers] are going to adjust elsewhere to ensure that the monthly payment is manageable. “
The rate hike will have the greatest impact on homeowners’ decisions about whether it is the right time to refinance… “Refinancing really depends on the rates,” says Kahn. Record low mortgage rates last year triggered a massive surge in mortgage refinancing, which has slowed slightly but is still ongoing. 46% more than a year earlier…
It may not require a significant rate change to constrain your refinancing plans. “Even a half-percent hike could be a big blow to the refinancing market,” says Kahn.
Treasury rates were growing steadily since August 2020and mortgage rates are starting to come under pressure. Barring an unexpected setback in our economic recovery, experts predict rate growth by the end of 2021. So if you’ve been considering refinancing, you still have time to lock in the best rate. Just make sure you not pay excessive fees and this refinancing aligns with your other financial goals and life plans.