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Homestead Financial Mortgage

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Mortgage rates dropped all of April, what happened?

Mortgage rates dropped all of April, what happened?

Low Mortgage Rates

Ever since the November presidential election, we heard all of the catchy phrases which meant mortgage rates are going up… “Trump Bump”, “Trump Trade”.   The benchmark, 10 year US Treasury yield has moved from 1.78% pre-election to as high as 2.60% in less than 4 months.
Then, April came… Now fears of the “Trump Trade Fade”, and the “Trump Bump Dump” have really just normalized the rate movement to more sane levels. Add some global uncertainty, and that’s how we have seen a great amount of downward movement in mortgage rates in April, and it’s happened without much notice.
 
Translation for the homeowner – With this recent drop in rates, how would refinancing benefit me?
– You have a rate in the 4’s with mortgage insurance on a 30 year or in the 3’s on a 15 year.
– You have any other consumer debt where consolidation makes sense.
 – You may have seen your credit card rates and other lines of credit increase recently due to rate increases by the Federal Reserve which act independently from mortgage rates.
Again, as always, if you ever want to find out if a refinance makes sense for you — that conversation is always FREE!

The Fed Raised Rates….Why Did Mortgage Rates Drop?

Homestead Financial | Mortgage Rates Drop

The U.S. Federal Reserve raised its key, Federal Reserve Funds Rate (Fed Funds) .25% on Monday, March 13th, 2017 for the second time this year, citing economic growth, job gains and confidence.

Then the mortgage market did something odd. Mortgage rates dropped. The yield on the 10 year US treasury peaked at 2.60% the day the FOMC chair, Janet Yellen announced the Federal Reserve would raise its key Fed Funds rate to 1.00%, from .75%.

The reason? Consumer debt gets pricing from DC and mortgages get their pricing from Wall Street. Fed Funds is the interest rate the Federal Reserve changes its member banks for short term loans. There is no direct correlation between the Federal Reserve raising rates and mortgage rates.

So in other words, Fed Funds going up has an effect on your credit card rates and consumer loan rates, rates tied to the prime lending rate, but not mortgage rates.

So what do I do if I’m in the mortgage market? The best indicator of mortgage rates is the yield on the 10 year US Treasury which can be found here https://finance.yahoo.com/quote/%5ETNX?p=^TNX