Long Term Mortgage Rates to Rise?
www.townandcountrymortgage.net
The inevitable correction in thecurrent inversion of the treasury yield curve may result in long-term mortgagerates actually rising as the Fed begins their anticipated loosening cycle thisyear.
Perhaps you are consideringrefinancing to a fixed rate mortgage to escape a rising adjustable rate,consolidate debt, take cash out or just lower the interest rate and payment. The media is full of stories about howthe Fed is likely done with their current tightening and their next move maywell be downward.
With conforming 30-year fixedrates now below 6% again, you may think it smart to wait for the Fed's move inhopes of getting an even lower rate. However, keep in mind the potential effect of a correction in thecurrent "inverted yield curve" on longer-term mortgage rates.
When the Fed funds rate,currently at 5.25%, hit its low of 1.00% in June 2003, the 10-year treasurynote yield was about 230 basis points higher than the funds rate at about3.30%. Currently, the 10-yeartreasury note yield is about 50 basis points lower than the Fed fund rate atabout 4.75%!
It is possible that, even with theanticipated reduction in the Fed funds rate, longer term mortgage rates couldremain where they are or even go higher as the normal relationship betweenshort and long-term rates is restored. The inevitable correction in the current inversion of the treasury yieldcurve may result in long-term mortgage rates actually rising as the Fed beginstheir anticipated loosening cycle this year.