Consumers Can Take Advantage of Cheap Money While Yields Are Low

Yields might be falling, which is causing fixed income investors to look the other way, but from a consumer credit standpoint, now’s a good time to take advantage of cheap money. From homeowners looking to refinance their current mortgage to a lower interest rate or students looking to borrow money for school, the current low-yield environment is highly attractive.

As it currently stands, the average mortgage rate for a typical 30-year fixed rate loan is at 3.71%. This could also help spur more housing purchases from prospective homeowners as well.

“Whether you are house shopping or refinancing, the rates today are a big advantage,” Tendayi Kapfidze, the chief economist at LendingTree, an online loan marketplace, said Tuesday.

For current homeowners, the low rates present an opportune time to tap into their existing equity.

“For people refinancing, this will be a more compelling proposition,” added Mark Hamrick,’s senior economic analyst. “You could be freeing up some money in your monthly budget and that money can be put to use.”

Then there’s the topic of student loan debt, which has been a contentious political topic the last decade as school expenses have only been rising to stratospheric levels.

Per a CNBC report, the average “rate on undergraduate Stafford loans is currently 4.5% for the 2019-2020 academic year but all federal education loans issued for 2020-2021 will be subject to new rates. The government sets the annual rates on those loans once a year, based on the 10-year Treasury note. If the 10-year yield stays near 1%, federal student loan interest rates could drop significantly when they reset in the spring, saving student borrowers hundreds of dollars in interest.”

10 Year Treasury Rate Chart

10 Year Treasury Rate data by YCharts

In times of low yields like today’s bond landscape, it can help to tilt your allocation towards fixed income exchange-traded funds like the iShares 20+ Year Treasury Bond ETF (NasdaqGS: TLT).

As for the fund itself, TLT seeks to track the investment results of the ICE U.S. Treasury 20+ Year Bond Index. The underlying index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than or equal to twenty years.

Advantages of adding TLT to your portfolio:

  • Exposure to long-term U.S. Treasury bonds
  • Targeted access to a specific segment of the U.S. Treasury market
  • Use to customize your exposure to Treasuries

The fund carries a paltry expense ratio of just 0.18%, the fund has been returning 14.75% year-to-date, according to Yahoo Finance performance numbers.

For more market trends, visit ETF Trends.