10-Year Treasury Yield Hits Highest Level in Over a Year. Here's How That Could Impact Mortgage Rates
Even with the rising Treasury bond yields, it's still a good time to buy or refinance a home.
On March 12, the 10-year U.S. Treasury bond yield reached its highest level in over a year. This came on the heels of President Biden signing a sweeping $1.9 trillion coronavirus relief bill into law and announcing that states are expected to make vaccines available widely by May 1. For Treasury bond investors, higher yields mean more money. But a higher Treasury yield could also impact mortgage rates -- and not in a good way.
The link between the 10-year Treasury and mortgage rates
Many of us are familiar with corporate bonds -- the kind companies issue to raise money for things like product research and development. Treasury bonds are issued by the U.S. government and are pretty much the safest investment you can make. The 10-year Treasury bond is just one of several bonds in this category.
What makes the 10-year Treasury so significant, however, is that its yield (the return you get when you invest in bonds) tends to influence mortgage rates; when its yield rises, mortgage rates usually follow suit. Now, the 10-year Treasury isn't the only factor that impacts mortgage rates. Other factors include the rate of inflation, the unemployment rate, and additional economic measures. But with the 10-year Treasury bond yield rising, we could see mortgage interest rates climb as well, and that's on top of the increases we've seen over the past few weeks.
Should you rush to buy or refinance a mortgage?
Mortgage rates are much higher today than they were a month ago. But they're much lower today than they were a year ago.
At several points last year, rates sat at record lows, and while that's no longer the case right now, today's rates are still quite competitive. That goes for mortgages as well as refinance rates. As such, if you're looking to buy a home or refinance an existing mortgage, don't get spooked by recent jumps -- you can still do quite well for yourself in today's mortgage rate environment.
That said, we don't know if mortgage rates will continue to climb over the course of the year or at what pace. Last year, there were many predictions that mortgage rates would largely hold steady throughout 2021, but that was before meaningful progress was made on the coronavirus vaccine front and before a massive stimulus bill was signed into law and made official. These developments, though extremely positive in their own right, could drive mortgage rates upward in the coming months. So if homeownership or refinancing is on your radar, it could pay to get moving sooner rather than later.
Of course, there are steps you can take to get the lowest mortgage or refinance rate available. These include making sure you have a great credit score (or working to quickly give your credit score a boost if that's not the case), keeping your non-mortgage debt to a minimum, and securing a steady source of income. Shopping around for a mortgage will also help increase your chances of snagging the lowest possible rate, so don't hesitate to seek out offers from multiple mortgage lenders before moving forward with one.
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