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The benefits of coronavirus: how you can save on fluctuations in the credit market

There is also a positive side to the economic crisis that Americans are facing due to the coronavirus: interest rates are at unprecedented low levels, and benchmark bond yields have fallen below 1% for the first time in history, which will likely lead to even greater cost savings across all loans - from mortgages to student loans. Writes about it USA Today.

Photo: Shutterstock

The US Federal Reserve (FRS) reduced the cost of borrowing to almost zero on Sunday, March 15, on an urgent basis to combat economic shocks from the coronavirus pandemic. Meanwhile, the yield on 10-year Treasury bonds, a key benchmark that affects the cost of borrowing for homes and car loans, fell to a historic low this month.

But experts say borrowers can benefit from a combination of lower rates and lower bond yields in the coming months.

Mortgages

Mortgage rates have fallen to historic lows as bond yields have fallen, which could help home buyers and those who want to refinance. When Treasury yields fall, banks set lower interest rates on mortgages.

The Fed's short-term key rate will affect the 30-year mortgage and other long-term rates. The average fixed rate on 30-year mortgages rose to 3,36%, compared with a record low of 3,29%. This is almost a full percentage point lower than 4,31% a year ago.

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“It's time to refinance,” says Julia Carlson, founder and CEO of Financial Freedom Wealth Management Group.

Student loans

Falling yields can also affect student loan interest rates. Experts warn that for Americans who go to college next fall and weigh financial aid offers, it’s important to separate scholarships from loans that need to be paid back.

“Once you take out a federal student loan, the interest rate is set for life,” says Robert Humann, CEO of Credible, an online loan marketplace.

If the Treasury's yield drops to zero, the interest on new loans for students will be 2,05%, graduate students will pay 3,6%, and the interest rate on loans for parents PLUS and Grad PLUS will be 4,6%.

On Friday, March 13, Treasury bond yields settled at 0,946% after falling to a record low of 0,318% in early March.

Кредитные карты

Credit card holders will probably not immediately feel the effect of the Fed’s last move to lower rates to zero, which is why it usually goes through several cycles.

According to Matt Schulz, chief industry analyst at CompareCards, for a person with $ 6 credit card debt, lowering your rates on Sunday March 000th could save you just under $ 15.

“While this is certainly positive news for those in debt, other steps will be much more rewarding,” Schultz said. “Perhaps the best thing banks could do is to allow cardholders to miss one or two payments during this time of crisis, without fear of fees, fines or interest charges. That would be a really big step. "

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