Refinance at the right time
Beverly Hills Mortgage Brokers determine the interest rates on their loan products based upon a variety of factors, including the yield on a 10-year Treasury Note, risk and consumer demand.
The interest rates can remain relatively stable over a long period of time, or they may rise rapidly in response to economic turmoil or other global events that threaten the financial environment.
Refinances can be done at the best time possible to save thousands on mortgage interest payments.
What is the baseline rate?
In the United States, the average homeowner sells or refinances within 10 years of their purchase. Lenders use the 10-year Treasury note yield to determine the baseline mortgage interest rates.
Mortgage brokers typically add a percentage of the Treasury rate to mortgage rates to cover the risk of default. Mortgages are considered a more risky investment than buying a U.S. Treasury note.
The mortgage spread is the difference between the 10-year Treasury yield and the mortgage rate. It can vary depending on many events.
How seasonality impacts mortgage interest rates
Refinance decisions are influenced by the season. Winter holiday season is traditionally slow in real estate markets. Homeowners want to be relaxed and not have prospective buyers visit their homes.
In order to attract new customers, lenders have reduced the spread on mortgage money because there is less demand. Refinances can be very profitable at this time.
However, summer is a busy time for home purchases so lenders are able to raise the spread which leads to higher interest rates.
Refinancing: What economic and global events have an impact
Beverly Hills Mortgage Brokers are sensitive to risk and may increase their spread if they receive bad financial news. These triggers are:
- Sudden fall in stock market index S&P 500
- Rise in unemployment numbers
- Inflation rise as measured by the Consumer Price Index
- The Federal Reserve increases the discount rate, the interest rate charged to member banks for borrowing money. These banks pass the higher rate along to borrowers as a higher mortgage spread.