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发表于 2009-7-15 17:02
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 Will 5-Year Mortgage Rates Fall Further?
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/ t! C! X4 o6 y/ A Banks last raised mortgage rates on June 9, when the 5-year bond yield was at 2.68%.2 [2 F* C, h" m$ T( O
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Since then, the 5-year yield (which guides fixed mortgage pricing) has fallen to 2.44%, but bank rates have not budged.. n1 r, D9 `6 _' V4 f" E6 i. n
5 [3 E5 C4 w; y3 E7 W% Q' f9 GBMO economist, Doug Porter, told the Toronto Star it’s because banks "want to be convinced that it is not a flash in the pan and that any retreat in yields is sustained."
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' Y: ^" U- p. ^3 ~- E. }He says: "I believe that we are probably not too far away from that point. It might take a little more of a deeper rally (in bond prices) to make it completely convincing."
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The often quoted CIBC economist, Benjamin Tal, thinks yields could fall another 0.05% to 0.10%, but any drop in fixed-rates will be short-lived. "By the end of the year, we'll start seeing rates rising," he says.! F, z% p$ u: N" _& q
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If rates do drop another 0.10%, it would translate into a $5.50 monthly payment savings for every $100,000 of mortgage. That’s a total savings of $478 over five years, assuming a 25-year amortization and typical fixed rates.
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8 S5 p J- X! V9 [3 W3 v% v: qBut remember, trying to time bond and mortgage rates is financially hazardous. While you’re waiting, rates can move the wrong way—quickly.
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You’re usually better served by focusing on factors that can dwarf a 0.10% rate savings, like finding a mortgage with the optimal term and just the right amount of flexibility (pre-payment options, openness, readvanceability, etc.). Too much flexibility is a waste, and too little can cost you in the long-run. |
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