Yield on mortgage securities dropped to their lowest levels in three months, a sign that mortgage rates on new homes will decline further.
Yields on Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds fell to 4.29% as of 3 p.m. in New York, the lowest since May 26, according to data compiled by Bloomberg. Yields are following Treasury rates down as recent auctions have been over-subscribed.
The demand for Treasuries and the drop in Fannie and Freddie coupons augers will for a drop in mortgage rates. The average rate on a typical 30-year fixed-rate mortgage dropped to 5.07% in the latest week based on data from Freddie Mac. That’s down from a high of 5.59% percent in June but up from the record low of 4.78% in April. Analysts believe that rates need to drop below 5% to spur another wave of refinancing. We're close but it's hard to believe rates will go below 5% or stay there for much longer with more Treasury sales coming and the economy beginning to show some signs of life.
While homeowners may have missed the rate bottom in April, now may be a good time to think about refinancing, if you haven't already.
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