Intermediate and long-term interest rates have fallen significantly in the past few months. For those who have yet to lock in long-term mortgage financing on their home, the recent decline in yields represents a new opportunity to lower their monthly mortgage payment.
As financial advisors, we are continually looking for ways to improve the financial outlook of our clients. While we focus much of our time on investing and the financial markets, another important aspect of financial health is on the liability side. Securing the cheapest debt possible can improve cash flow, budgeting and even the ability to save.
The 10-year US Treasury bond is often considered the “benchmark” for intermediate term bonds in the marketplace. As measured by the Federal Reserve, the 10 Year US Treasury hit its most recent peak at just over 3.2% in November of 2018. Today, the 10-year US Treasury yields about 2.7%.
When matched with the appreciation in housing prices in Denver and across Colorado, a lower interest rate loan can go a long way towards improving affordability. Indeed, the reduction in mortgage rates is not insignificant. Depending on the size of a family’s mortgage, a 1% point increase to their mortgage rate would result in several thousand dollars per year of increased payments, according to CNBC and Zillow.
The flip side of rising rates and increased mortgage costs, is falling rates and decreasing mortgage costs. If you weren’t lucky enough to lock in a long-term rates several years ago, you can still get a 30 year fixed rate mortgage for under 5%. Perhaps unsurprisingly, there was a 23.5% uptick in mortgage applications for the first week of 2019.
As always, please feel free to reach out to us to discuss mortgage and how it fits into your full financial plan.