WASHINGTON–Could a new wave of mortgage refinancings be headed credit unions’ way?
Earlier this week the yield on the benchmark U.S. 10-year Treasury note closed below 1.4% for the first time on record, the latest declines in global government bond yields following the U.K.’s vote in favor of Brexit. The 10-year Treasury yield also hit a record low of 1.367%, compared with 1.446% the previous week. The previous closing low was 1.404% in July 2012.
At one point, the buying sent the yield on the benchmark U.S. Treasury note to as low as 1.370%, surpassing the previous historical low of 1.385% set just two days earlier.
What all of that will likely mean, analysts are saying, is new low rates in mortgage markets in the U.S., as the average rate on the 30-year, fixed-rate mortgage is already approaching record lows, which could mean significant new refinancing activity.
Another contributing factor: while rates have been low for some time, as the country has recovered from the recession millions of homeowners have gained new equity in their homes as home prices have surged.
A report from the Urban Institute has suggested that the market could see as many refinances as it did from 2008-2014 when 25 million Americans refinanced their homes.
Not everyone will benefit, however. The Urban Institute report notes that investors in mortgage-backed securities (MBS) will see reduced returns and even losses as the result of prepayments of outstanding mortgages. Mortgage servicing firms will also see reduced income.
In its analysis, MSNBC reported “the yield on the 10-year Treasury, which mortgage rates loosely follow, will have to stay low for a while, however, before mortgage rates move significantly lower, as there are more costs involved today for lenders than there were even four years ago. That is thanks to new federal regulations on lending.”
"What guys are probably doing in the mortgage world is not really ramping up and seeing where the volatility shakes out. If they stay at these levels, you will see rates drop to the 3.25% range which will signal a material change," MSNBC quoted one analyst as saying.