First, just a quick review of what it is? When short term rates are higher than long term rates, a normal curve basically starts going the opposite way (e.g. 2 year Treasury rate is higher than a 10 year Treasury rate).
It’s sort of like this:
The light end on the ground doesn’t make sense and neither does an inverted yield curve. Either short term rates will go lower, or long term rates will go higher, but something is going to happen.
So…..with rates in an inversion and the media in an uproar, what to do?
Here are a few things to help you save money!
1. Consider refinancing your mortgage; call your current lender as many will be willing to essentially “recast” your mortgage with minimal effort. Usually the processing fee is made up in a few years – make sure you ask that they use the “reissue rate” for Title insurance.
2. Consider refinancing your Home Equity Line of Credit (HELOC) – these are based on short term rates (see example above). You may be able to add this to the mortgage or shift it to a Home Equity Loan with minimal cost and lower rate.
3. Review other debt (credit cards, student loans, etc.) to refinance.
4. Maybe consider the house you’re planning on buying? Instead of waiting for the right price, go with the right rate! Waiting may actually cost you money if mortgage rates go up a percent or two.
But what if rates go lower? Smile and refinance!
But what if rates go up? Smile and brag!
If you’re debt free, then this doesn’t apply to you! (Just smile…. no point in rubbing it in!)
When the markets give you lemons, make lemonade!