The inevitable correction in the current inversion of the treasury yield curve may result in long-term mortgage rates actually rising as the Fed begins their anticipated loosening cycle this year.
Perhaps you are considering refinancing 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 how the Fed is likely done with their current tightening and their next move may well be downward.
With conforming 30-year fixed rates now below 6% again, you may think it smart to wait for the Fed’s move in hopes of getting an even lower rate. However, keep in mind the potential effect of a correction in the current “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 treasury note yield was about 230 basis points higher than the funds rate at about 3.30%. Currently, the 10-year treasury note yield is about 50 basis points lower than the Fed fund rate at about 4.75%!
It is possible that, even with the anticipated reduction in the Fed funds rate, longer term mortgage rates could remain where they are or even go higher as the normal relationship between short and long-term rates is restored. The inevitable correction in the current inversion of the treasury yield curve may result in long-term mortgage rates actually rising as the Fed begins their anticipated loosening cycle this year.
Long Term Mortgage Rates to Rise?
December 11, 2008
By: Jim Warns,
www.townandcountrymortgage.net
The inevitable correction in the current inversion of the treasury yield curve may result in long-term mortgage rates actually rising as the Fed begins their anticipated loosening cycle this year.
Perhaps you are considering refinancing 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 how the Fed is likely done with their current tightening and their next move may well be downward.
With conforming 30-year fixed rates now below 6% again, you may think it smart to wait for the Fed’s move in hopes of getting an even lower rate. However, keep in mind the potential effect of a correction in the current “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 treasury note yield was about 230 basis points higher than the funds rate at about 3.30%. Currently, the 10-year treasury note yield is about 50 basis points lower than the Fed fund rate at about 4.75%!
It is possible that, even with the anticipated reduction in the Fed funds rate, longer term mortgage rates could remain where they are or even go higher as the normal relationship between short and long-term rates is restored. The inevitable correction in the current inversion of the treasury yield curve may result in long-term mortgage rates actually rising as the Fed begins their anticipated loosening cycle this year.