The economy is reopening. Americans are getting back to traveling, eating out and going to movie theaters and ballgames. But if you expected the robust recovery to translate to a rapid climb in mortgage rates, think again.
The rate on 10-year Treasury bonds—a closely watched metric, and a key benchmark for mortgage rates —dipped below 1.46 percent Thursday. Before the recent retreat, the yield on government bonds rose as high as 1.69 percent in May.
The decline in Treasury yields came after a new report showed that the U.S. trade deficit had hit record levels. For mortgage borrowers, the drop in Treasury yields is likely to translate to a downtick in mortgage rates. As a rule of thumb, the 10-year Treasury tracks 150 to 200 basis points above the 30-year mortgage rate.
“The response in mortgage rates to moves in underlying Treasury yields tends to be fairly immediate,” said Greg McBride, Bankrate’s chief financial analyst. “A pullback in Treasury yields one day means lenders are often changing pricing that day and borrowers are getting better rate quotes within hours. With Treasury yields pulling back to start the week, it makes for an opportune time for borrowers to lock their rates.”
The reversal of Treasury yields is just the latest curveball thrown by the economy. Mortgage experts expect mortgage rates to keep climbing this year—and any retreat in Treasury yields could prove fleeting, said Joel Naroff, head of Naroff Economics.
“There really is little reason for the decline in Treasurys,” Naroff said. “Inflation is not going away, growth is strong and the economy is just starting to fully reopen. I expect a rebound in Treasury rates, so any mortgage rate declines will likely be temporary.”
What you can do to secure a smooth—and profitable—refinance.
Mortgage rates have risen from the all-time lows set in January, but there’s still time to refinance your mortgage. Here are three pro tips:
-Shop around: The best deals go to borrowers who compare mortgage offers. By getting at least three quotes, you can save thousands of dollars over the life of the loan.
-Consider a rate lock: Lenders typically extend rate locks for 30 to 60 days, meaning you won’t have to pay more if rates go up before your loan closes. These aren’t normal times, though, and many refinances aren’t closing within 30 to 60 days, so make sure your lender is willing to extend your rate lock if your deal is delayed.
-Keep your credit score tight: Now isn’t the time to miss a payment, take on new debt or otherwise do anything to lower your credit score. Lenders are being especially strict about borrowers’ credit histories.