After falling to a three-year low, mortgage rates crept up slightly this week, which raises the question: Are rates poised to head even higher?
In Bankrate’s latest Rate Trend Index, 50 percent of experts predicted mortgage rates will rise over the next week. Another 40 percent said rates will stay about the same (plus or minus two basis points). Only one respondent predicted rates to decrease.
Investors’ coronavirus fears have subsided following a week of sell-offs, which has helped to push mortgage rates up. The recent rise in the benchmark 10-year Treasury, up three consecutive days as of Wednesday, is a strong indicator that investors are backing away from safe-haven assets. Additionally, the positive jobs data, which showed 291,000 more private payroll jobs in January — the largest leap since May 2015 — is a powerful barometer for investors who want to move back to riskier assets, which help drive Treasury yields higher.
Mortgage rates closely follow the 10-year Treasury yield. As a result, the 30-year fixed-rate mortgage rose this week to 3.73 percent, up from 3.7 percent last week, according to Bankrate’s latest national survey of mortgage lenders.
“The coronavirus scare that spooked markets over the last week appears to be waning,” Michael Becker, branch manager of Sierra Pacific Mortgage, told Bankrate. “Stories reported in the press suggest the worst may be behind us. Whether this is true or not, I do not know, but markets have taken it as a good sign, so we will likely see higher Treasury yields and mortgage rates in the coming week.”
When borrowers should lock in a rate
As headlines helped pull rates close to historic lows, giving borrowers a chance to save even more money, change can come without warning. So, consumers who are ready to take on a mortgage or refinance an existing one likely shouldn’t wait for rates to drop further.
“Sentiment swings both ways, and just as quickly as fears about the economic impact of coronavirus surfaced, driving rates lower, they reverse themselves with rates rebounding,” says Greg McBride, CFA, Bankrate chief financial analyst. “This underscores the importance — particularly for refinancing — of acting quickly when rates drop suddenly, as there is no guarantee about how long the opportunity lasts.”
Mortgage rates are low by historical standards. The current average rate on a 30-year fixed mortgage is 3.7 percent, 84 basis points lower than it was a year ago.
For homebuyers, this is an excellent time to lock in a rate. The same goes for existing mortgage holders who want to refinance. As there’s no guarantee what might happen with rates tomorrow, waiting could end up costing you money.
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