February 8th, 2016 3:18 PM by Narbik Karamian
Mortgage rates dropped again today as the 10-Year Treasury yield hit 1.74%. The 10 Year-Treasury yield is one of the biggest contributing factors for determining long term mortgage rates.
Just to help build perspective, below is a chart that demonstrates the movement of the 10-Year Treasury yield since 1960 and since 2007. As you can see, it is now at another all-time low again.
The average 10-Year Treasury yield was:
1.90% in 2015,
2.02% in 2014,
2.10% in 2013,
1.84% in 2012 (it hit its lowest point between June and August causing mortgage rates to hit an all-time historic low during that time),
2.80% in 2011, and
3.15% in 2010.
Even though the Federal Reserve raised its Federal Funds rate in December 2015 by 0.25%, we did not see an increase in long term mortgage rates primarily due to the big picture economic considerations and global financial market turmoil. Low oil prices and volatile stock markets have been helping keep mortgage rates low. Most of the more focused economic data has been falling short to move markets upwards in general. We do not anticipate the Federal Reserve to raise the Federal Funds rate again in 2016.
It is worth mentioning that last Friday's relatively positive Employment Situation report, which is one of the most important economic reports of any given month, did not impact mortgage rates for the worse as it had been anticipated to do so if the report was positive.
The current situation in the market may be a good opportunity for home buyers to secure competitive rates for their home purchase financing as well as, homeowners who currently have loans below $625,500 (the government maximum lending limit in most counties in California) to take advantage of a 30 year fixed rate loan under 4%. Jumbo loans (above $625,500) are also at one of their lowest rates as well.
For folks who intend to pay off their loan faster, interest rates are even lower for a 15 year fixed rate product. Also, the current rates for Adjustable Rate Mortgages (5/1 and 7/1 ARMs) programs are very attractive for homeowners and homebuyers who do not have the intention of keeping their current property for long term.