At least when it comes to the financial markets, over the past few weeks all anyone can talk about is Tesla and Bitcoin. Which makes perfect sense. Just look at the chart below.

Source: YCharts

However there is something else anyone with a home mortgage should be paying attention to.

According to Freddie Mac, home mortgage rates hit another all-time low this week. Whether you are looking at 15 year or 30 year conventional mortgage rates are down some 100bp or 1% in the past year.

Source: Freddie Mac

As with the Tesla and Bitcoin charts, it looks like mortgage rates go only in one direction – down. Does that mean you should rush out and refinance your mortgage? As with all things personal finance, it depends. It depends on the last time you refinanced your mortgage, how long you plan on staying in this house and a whole lot more. Above all, you don’t want to make a mistake that could cost you for years to come.*

Then again, there’s nothing to prevent mortgage rates, in theory, from continuing to go lower. Danish homeowners can now get 20 year mortgages with a 0% interest rates. Yes, zero. They can borrow money for twenty years and pay it back with no interest!

Today, the 10-year Treasury note yields 1.12%, up some 20bp in the past month. If you use 1.12% to calculate a ‘fair mortgage rate’ based on this chart you get an implied 30-year mortgage rate of 3.18%. This means that at today’s rates, mortgages are lower than what history implies they should be. In the end, the market is the final arbiter of things, but this discrepancy is worth noting.

There are plenty of things you can do in the new year to improve your finances. If nothing else, put refinancing your mortgage on your radar screen for 2021. Unlike trading Tesla or Bitcoin, the mortgage application process takes a lot longer than a few seconds. Rates could continue going lower – weird stuff happens all the time. But you don’t want to regret locking in a historically low mortgage rate amidst everything else going on in this crazy world.

*It goes without saying but this is not personalized advice. Everybody’s situation is unique. You should consult with the relevant financial professionals before undertaking any action.

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