Well, the last few weeks have been interesting, to say the least. The Federal Reserve finally lowered interest rates, but not as much as Wall Street wanted. The on-and-off trade deal with China is spooking the markets with huge swings in the Dow and Standard & Poor’s. And now we have the rare occurrence of the dreaded inverted yield curve.
So, what does this mean for real estate? All this uncertainty— not only here but overseas — is driving interest rates way down. Look at the accompanying chart to see how much the yield on the U.S. 10-year Treasury bond fell this year. It’s actually down at the same level as when the Brexit deal was approved in England. The 10-year bond today is yielding 1.55 percent, just slightly above the Brexit lows.
But keep in mind that things always change, so the low rates you see today could easily vanish in a few weeks and who knows when they’ll be back at this level again. My advice to you is run, don’t walk, to refinance your home as the rates are too good to pass up.
According to Andy Block of Opes Advisors, rates are great today. It’s really impossible to give exact rate quotes as there are so many variables that go into the calculations, including credit score, income, lender fees, etc. But for both conforming FHA and jumbo loans, rates for 30-year fixed mortgages are 3.5 to 3.75 percent and the 15-year fixed mortgages are around 3 to 3.125 percent.
Personally, I think mortgage rates should be much lower than they are now as banks seem reluctant to drop rates in tandem with the 10-year bond. Guess they’re trying to squeeze extra profits out of you. Banks have this follow-the-crowd mentality so will react to what their competitors do. Left to their own resources, they will keep rates up as high as they can untill they are forced to lower them. But the banks sure don’t have any problem in raising rates immediately.
This chart shows both mortgage rates and yields on the 10-year Treasury bond since 2007. Keep in mind that the Fed may also have one or two more rate cuts this year. Of course, a few months ago they had a different outlook on the economy than they do now and wanted to raise rates this year. Take advantage of this drop in rates and think of all the money you’ll save.
Steve Hyman is the broker and owner of Century 21 Sunset Properties. He can be reached at 726-6346 or century21sunset.com