If you been distracted with the high volatility of the global stock markets and all the routine daily challenges of life, you may not have noticed that the 10 Year Treasury Bonds interest rates plummeted to 1.33% two weeks ago reaching the lowest rate in history!
The decline of the 10 Year Treasury has been trending since the early 1980’s along with most other interest rate instruments. So why is this important to you? Closely correlating to the 10 Year Treasury are residential mortgage rates. Two years ago we wrote about the then ultra-low 30-year mortgage rates of 4% stating these rates may never be seen again in our lifetime. Well now thanks to the decline of global economies, the US 0.25% – 0.5% discount rate, and negative interest rate policies in countries around the world, mortgage rates have also fallen to now historic levels not seen since the 1960’s.
During the stock market crash due to Brexit, I noticed that Treasury yields were also dropping to what became historical lows. That following weekend I started researching mortgage rates for owner-occupied and investment properties. I discovered that mortgage rates had fallen almost 0.5% since I looked at them a couple of months earlier. Over the weekend I researched lending companies regarding their rates, company ratings, and customer satisfaction and on the following Monday locked in rates for my primary residence and investment properties reducing my rates by almost 1% to around 3.7%.
If your 30 year fixed mortgage rates are north of 4.5%, you may also want to do your own research. To assist, let me share my experience and research.
- I found several online mortgage companies had very high marks for customer satisfaction and company ratings. If you have not refinanced, let me say it can be an arduous process. One of my clients is a perennial refi’r (yes, I made up a word and then contracted it) that has been effective in orts related to treducing her monthly payments almost every couple of years while not paying any fees. The two best rated online companies I found were lendingtree.com and www.guaranteedrate.com. I decided to go with Guaranteed Rate and after completing their online application, I received a call literally within minutes. Note that the majority of customer rephe particular person they worked with and not the company. So I research the employee sites of these companies to read about what the employees are chatting about their own companies. The employees at Guaranteed Rate seemed to be the happiest. I interviewed Michael, the broker assigned to me from Guaranteed Rate, to learn he has been with the company for several years for more than ten years as a mortgage broker and he has a dedicated experience team of 2 others. I emphasized to him the importance of keeping me informed and providing updates. So far my experience with Michael has been excellent.
- I called my current bank (not disclosing their name but initials are BofA) servicing my mortgages to compare rates. They were unable to match the rates offered by Guaranteed Rate. It can be a time and expense saver to work with your current lender but in my case, the bank could not offer the best rate.
- In researching possible interest rates, always ask about fees. If you impound your property taxes and insurance, there will be a transitional cost of closing out your current impound account and funding the new impound account. In addition, there are fees for the lender, escrow, property appraisal. The “par” pricing of mortgage rates excludes any lender credits to cover costs. In my case, I increased my rate from 3.5% to 3.65% for several of the properties to gain 0.50% lender credit of the loan amount to cover all the refi costs. For clarification as an example, 0.50% lender credit on a $100,000 loan is $500. I don’t like to pay fees to refi and at 3.65% I’m not going to worry about an extra 0.25% increase in my rate.
WHAT DOES THIS MEAN TO ME?
Sometimes lemons can turn into lemonade. The US stock market has a near 0% return since last year and a slowing economy both in the US and around the globe has forced banks to reduce rates to attract borrowers. Your largest debt is probably your mortgage, and you should regularly determine if there are opportunities to reduce the interest rate cost of this debt. I thought mortgage rates bottomed at 4% two years ago, and maybe 3.5% is not the bottom. A typical rule of thumb is if you can reduce your mortgage rate by 0.5% then it may be appropriate to refinance. Economic conditions will eventually improve and in the meantime, this is a good time to reduce lending costs and debt.