Is now the time to buy or refinance 1 ? A GUIDE TO UNDERSTANDING HOME MORTGAGE OPPORTUNITIES
During this difficult period, the near record- low mortgage rate environment presents an opportunity for consumers to purchase properties or lower their monthly payment. Rates have been low for many years, so how do you determine if now is the right time to make a purchase you have been thinking about or refinance your current property? To explain the mortgage environment during the pandemic, we asked Bruce Duclos, CB&T Senior Vice President and Mortgage Division Manager and Anthony Valeri, CB&T Investment Management Director for Wealth and Fiduciary Services, to review current conditions and advise how you should assess your opportunities. WHAT IS THE CURRENT ENVIRONMENT? We have seen stability in the market with continued demand for properties without the significant weakness in housing experienced in 2008 and 2009. Rates are at the lowest since 2012 and 2016. The low-rate environment presents an excellent opportunity to acquire a new property or refinance existing loans. As the U.S. Treasury issues more bonds, there may be upward pressure on interest rates later this year. SHOULD I REFINANCE? It may be a good time to revisit your mortgage because the market is favorable for many borrowers. However, businesses and consumers with mortgages initiated in late 2012 (or mid- 2016 when mortgage rates were also low) may not see enough savings to benefit, particularly
if refinancing extends the maturity of a loan. not see enough savings to benefit, particularly if refinancing extends the maturity of a loan. WILL RATES CONTINUE TO DECLINE? Rates on U.S. Treasury bonds have declined to record lows in response to the COVID-19 pandemic and the subsequent interest rate cuts by the Federal Reserve. Initially, mortgage
rates failed to match the decline in U.S. Treasury rates due to bottlenecks and
disruptions from the pandemic. However, these pressures have since subsided and closed the gap between mortgage rates and Treasury yields. As a result, property owners need to keep in mind that further declines are likely to be limited to approximately 0.25 percent. Rates are likely as attractive as they are going to be. WILL RATES STAY LOW? Interest rates are likely to stay low for some time. Economic recovery from the coronavirus will be gradual and the Fed is unlikely to raise rates anytime soon. Our research shows that once the Fed starts to lower interest rates, they remain low for an average of four years. The current rate cut cycle began in June 2019, so you may have some time to take advantage of lower interest rates. However, this economic shock is different, and owners and buyers may not want to delay a purchase or a refinance. The effort and global coordination to find medical treatments for the virus are progressing and may lead to effective treatments.
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IN YOUR CORNER ISSUE 5 | 2020
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