Jul 13, 2009
Current Home Mortgage Rates are Low - Time to Refinance?
Current home mortgage rates are working their way back towards 5% so is now the time to refinance? Over the last few weeks, average mortgage rates have dropped from 5.59% to 5.2% and are likely to go much lower. Last week the Federal Reserve Bank announced it was buying back more United States debt which sent the yield on the 10 year treasury rate tumbling. The yield on the 10 year and 30 year fixed mortgage rates have a very strong correlation.
When looking at the yield on the 10 year treasury rate you will see that it has been in an uptrend since the beginning of 2009 but that uptrend is currently being tested. Any significant movement down and that upward trend will definitely be broken which means we will see even lower mortgage rates. This is great news for those of you who have been thinking about refinancing your current home.
Many home owners might ask if they should wait to refinance if rates are going to go lower. Well, there is a very big seperation in the risk to reward ratio when doing this. The reason mortgage rates are so low is because the Federal Reserve Bank continues to buy up United States debt. If for one week they decide not to do this, you could see interest rates shoot up as much as .75% in one week. Remember the last week in May?
With that being said, the Federal Reserve has been adamant about buying up debt. This makes me think mortgage rates will continue lower. The one bit of advice I would give anyone when it comes to making large financial decisions is to make it work for you! If you have some extra money saved up to cover closing costs and you have the time and energy to go through the refinance process now, go for it! If you wait a month, hoping mortgage rates go down, something may happen in your life that will not allow you to put forth this time and effort.
Overall it is likely that rates will continue down, but sometimes the risk is not worth the reward. If you wait a month and the Fed stops buying debt for two straight weeks, mortgage rates could go from 5% to 5.8% before you know it. Do I think the Fed will stoping buying debt, no, but it is possible. My suggestion would be to take the refinance step when it is right for you! Mortgage rates are likely to stay around these levels or lower for quite some time so decide when the best time for YOU is.
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