The yield on the 10-year Treasury note reached 3% this week (climbing from a low of 1.36% in July 2016), so what does it mean for you? For home buyers or refinancing, the rate on a 30-year mortgage tends to move in relation to the 10-year yield, therefore, as the 10-year yield goes up to 3%, so will your mortgage interest rate. According to Freddie Mac, the average rate on a 30-year, fixed-rate mortgage is 4.47%, up from 3.99% at the end of last year. “For example, a 3.5% rate on a $500,000 loan would create a monthly payment of $2,245, according to LendingTree. At 4.5%, the monthly payment would be $2,533, excluding taxes and insurance.”
However, the yield increase should have minimal effect, if any, on your bank deposits, stock portfolios, your taxes, or the economy - as the unemployment rate is expected to drop lower to 3.8% by December. on the bright side, higher treasury yields often translate to a stronger dollar, and a stronger dollar makes it cheaper to enjoy your vacation if you’re traveling abroad.
Companies mentioned: FMCC