Following the COVID-19 ourbreak, 10-year Treasury note hit record low of 0.54% one year ago on March 9 due to investors preferred to put money into safety assets to deal with the uncertainty during the global health crisis.
As a reliable indicator of economic sentiment and a key benchmark for mortgage rate, lower yields on Treasury note means lower rate on home mortgage. Buyers need to pay less for the same properties, homeowners will decrease their monthly payment by refinancing . That’s the fundamental reason why the real estate market was in booming even though other business were in struggling. Low rate also stimulated the mortgage requirement, refinance applications even exceeded the capacity of processing of lenders ,hence force them increase their mortgage rates to dissuade new applications. But when it turns to 2021, starting from the January , the 10 -year Treasury began to go high steadily to 1.6% on March8 to reflect growing optimism about a post -pandemic economic recovery, and trillions in government stimulus. People will ask is it still a right time to refinance my home since 10 -year note had doubled from the bottom. Before answering this question, let’s look at what are the main factors to affect our mortgage rate. Considering what made record low mortgage rate in recent one year, we may first think the pandemic , the wide spread health crisis , which had profound impact on the economic activities. Government employed all kind of rescue plans, such as buy MBS(Mortgage back Securities),to provide liquidity on the market ,thus pushing down mortgage rate. Be cautious , large amount of money pump into market in relatively short period may cause inflation fears, Interest rate will rise to curb the money supply. So prospective inflation also play in deciding the mortgage rate. Fed watch closely on some economic indictors to decide if the economy is recovery and needs to keep stimulus plans. The most used are inflation rate and unemployment rate. Fed Chairman Jerome Powell said inflation is likely to rise as the economy recovers, but he thinks it will be temporary. Without more durable inflation and a return to full employment, he said the central bank is unlikely to raise interest rates. According to the Bureau of Labor Statistics ,unemployment rate dropped from peak of 14.8% to 6.2% of February 2021,but still higher than 3.5% of 2019. Normally average unemployment rate is about 5%. In conclusion, before the economic data reach the target , the Fed will not strain the stimulus. Powell also stated that rate won’t increase until 2023. From my point of view, I think the mortgage rate will keep constant, but a little bit up at Q4 2021 depending on the recovery of economy. So if you still hesitate to do refinance ,act right now ! It is still a right time to take advantage of the low rate. Below is a projecting rate table for 2021 and 2022 from https://www.thetruthaboutmortgage.com
| Q12021 | Q22021 | Q32021 | Q42021 | 2022 | |
|---|---|---|---|---|---|
| Fannie Mae | 2.7% | 2.7% | 2.8% | 2.8% | 2.9% |
| Freddie Mac | 3% | 3% | 3% | 3% | N/A |
| MBA | 3.1% | 3.1% | 3.2% | 3.3% | 3.6% |
| NAR | 2.9% | 3% | 3.1% | 3.2% | 3.4% |