Credit Union Mortgages are based on the 10 year Treasury yield. Currently near all-time lows and with many upward pressures on rates, now is the time to act on getting the best rate.
You have probably heard a lot about mortgages lately. On the radio, on TV, from your friends, in the newspaper – it seems like wherever you turn there is talk about mortgages. Soon, you may be looking at getting a credit union mortgage yourself. However, you may be wondering just what makes credit union mortgage rates go up and down. How do you know when you are getting a good deal?
Foundation of Credit Union Mortgage Rates
The story starts with U.S. Treasury yields. These are the rates that the U.S. government pays to borrow money for 10 years. Up until a few years ago, there was a 30 year U.S. Treasury which matched up very well with the typical 30 year mortgage. Lending money to the U.S. government is considered “risk-free” because they can always pay – printing money if necessary to pay their bills. Credit union mortgages trade above that rate. How much higher depends on your income and credit history.
Historical Range of U.S Treasury Rates
Over the past 60+ years, the U.S. Treasury rate has been about 5.5%. It is still below that amount, and in the last six months has been at historically low levels. In October of 2010, it was as low as 2.5%. It has since increased to 3.65% in mid-February, with many feeling within the next twelve months we could see that rate rise to at least 4.0%. Credit union mortgage rates move in tandem with the benchmark 10-year Treasury yield.
Impact on Refinancing Credit Union Mortgage Borrowers
As overall interest rates rise, credit union mortgage rates will rise as well. It is quite possible that the next 12 months will bring 30-year fixed credit union mortgage rates to between 5.5% and 6.0%. These rising rates affect both those trying to refinance their homes and those buying new homes. However, it affects those trying to refinance more. That is because those trying to refinance already have a home and a credit union mortgage. Therefore, they are comparison shopping and seeing if the loan is cheaper. If it is, then they must determine how long it will take them to be paid back the cost of taking out a new loan at a lower rate. As those rates rise, it either takes the homeowner longer to get paid back or makes it impossible to save any money doing so.
New home buyers are affected due to the fact that they will be able to borrow less for a given monthly payment. Therefore, buyers will have to find homes that are cheaper than what they were looking at before. However, the biggest driver of new home sales is the ability to obtain financing of any kind. Therefore, a gradual rise in rates is unlikely to impact the recovering housing market very strongly.
Act Now On Your Credit Union Mortgage
As of mid-February, 30 year fixed-rate credit union mortgage rates were at 5.05%, marking the first time since May of 2010 that they had topped the 5% barrier, according to Freddie Mac’s Primary Mortgage Market Survey (which factors in an average 0.8 points in fees that the borrower paid to lower their rate). Due to the fact that we are still near historic lows, and many of the pressures on interest rates are in the upward direction, now is a great time to refinance or to get into that new home you have been looking at.