Why you shouldn't panic about rising mortgage rates

by Kathryn Vasel   @KathrynVasel December 15, 2016: 12:27 PM ET

Mortgage rates have been on a steady rise recently, but buyers shouldn't panic -- rates are still very low.

The average rate for a 30-year fixed-rate mortgage rose to 4.16%, up from 4.13% last week, according to Freddie Mac. A year ago, rates were sitting around 3.97%.

At the current interest rates, buyers will pay $21 more per month compared to a year ago, assuming a $241,000 price tag and 20% down payment.

"I don't think anyone welcomes higher interest rates, but it should not be a considerable deterrent to someone who really wants to buy a home," said Keith Gumbinger, vice president of HSH.com.
Rates under 5% have been the norm for a decade. "We still have quite a ways to go for rates to be even close to average," noted Len Kiefer, deputy chief economist for Freddie Mac.
In 1996, the average rate was 5.67%, and in 1990 it was 10.13%.
Related: Mnuchin wants U.S. to sell Fannie Mae, Freddie Mac stakes
Rising home prices, fueled by strong demand and tight inventory, have pinched buyers in recent years. Lower interest rates helped temper that rise, but as they move higher, borrowing becomes more costly and can reduce a buyer's budget.
"If rates remain at this level, some marginal buyers could be pushed out of the marketplace," said Gumbinger. "There could be less demand for properties on the margin, but I don't think there will be a huge change."
Kiefer said he expects home prices to continue to rise in 2017 year, but at a slower pace than we saw this year. "The supply is pretty low compared to demand and that will keep pressure on prices and rents."
The rate increases could be felt more by house hunters in the country's more expensive markets, like San Francisco and Manhattan.
"Affordability is already difficult in some markets," said Erin Lantz, vice president of mortgages for Zillow. "Rates can have more of an impact in those areas, but for most of the country, it's still very affordable, by historical standards"
Mortgage loan applications dropped 4% last week, according to the Mortgage Bankers Association.
Experts forecast rates will continue to gradually increase throughout 2017, particularly after the Federal Reserve increased a key interest rate on Wednesday for the second time in 10 years.
A higher Federal Funds rate makes it more expensive for banks to borrow money, which can lead to higher rates on credit cards and home loans.
Related: What a Fed rate hike means for you
"The era of ultra-low interest rates is over," said Lawrence Yun, chief economist of the National Association of Realtors, in a statement Wednesday. "[The] short-term rate hike will be followed by several additional rounds of increases in 2017 and 2018. Despite these moves, mortgage rates will not rise alarmingly."
The bond market also plays a role in mortgage rates. Interest rates on the U.S. government's 10-year Treasury note have been on a tear since Donald Trump was elected president. Treasury notes are a benchmark for many types of credit, including home loans.
Other factors -- like global economic uncertainty -- also affect U.S. mortgage rates.
"Global markets have sneezed and hiccupped and gone crazy at times and have driven down our interest rates," said Gumbinger.
For instance, after the Brexit vote in June, the rate on a 30-year fixed rate mortgage dropped to 3.48% -- the lowest level since May 2013.
As rates move higher, we could see the return of more home loan products, like adjustable rate mortgages.
"Non-traditional mortgage products could start to creep back into the market as consumers search for more affordable options," said Lantz.

CNNMoney (New York) First published December 15, 2016: 12:27 PM ET

Robert Bobby Darvish Platinum Lending Solutions Orange County 

Mortgage Rates Move Higher

Mortgage Rates Move Higher

MCLEAN, VA--(Marketwired - Dec 15, 2016) - Freddie Mac ( OTCQB : FMCC ) today released the results of its Primary Mortgage Market Survey® (PMMS^®), showing average fixed mortgage rates moving higher for the seventh consecutive week.

News Facts

• 30-year fixed-rate mortgage (FRM) averaged 4.16 percent with an average 0.5 point for the week ending December 15, 2016, up from last week when it averaged 4.13 percent. A year ago at this time, the 30-year FRM averaged 3.97 percent.
  
  
• 15-year FRM this week averaged 3.37 percent with an average 0.5 point, up from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 3.22 percent.
  
  
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.19 percent this week with an average 0.4 point, up from last week when it averaged 3.17 percent. A year ago, the 5-year ARM averaged 3.03 percent.
  
  

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Quote
Attributed to Sean Becketti, chief economist, Freddie Mac.

"As was almost-universally expected, the FOMC closed the year with its one-and-only rate hike of 2016. The consensus of the committee points to more rate hikes in 2017. However, the experience of this year combined with the policy uncertainty that accompanies a new Administration suggests a wait-and-see outlook.

"This week's mortgage rate survey was completed prior to the FOMC announcement. The 30-year mortgage rate rose 3 basis points on the week to 4.16 percent. The MBA's Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases. If rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017."

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is the largest source of financing for multifamily housing.  Robert Bobby Darvish of Platinum Lending Solutions Orange County

Mortgage rates reach highs not seen in more than a year

 

(Photo by Win McNamee/Getty Images)

Mortgage rates sustained their upward march this week without any indication that their trajectory will slow anytime soon.
Home loan rates had been on the rise before the election. But since Donald Trump’s victory, they have been on a tear.

According to data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 4.08 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) The rate was 4.03 percent a week ago and 3.93 percent a year ago. The 30-year fixed rate has now gone up more than half a percentage point in the past three weeks. It hasn’t been this high since mid-July 2015.
The 15-year fixed-rate average jumped to 3.34 percent with an average 0.5 point. It was 3.25 percent a week ago and 3.16 percent a year ago. The 15-year fixed is at its highest level since October 2014.
The five-year adjustable rate average rose to 3.15 percent with an average 0.4 point. It was 3.12 percent a week ago and 2.99 percent a year ago. The five-year ARM hasn’t been this high since late January 2014.

Many observers expect higher rates to endure because of recent strong economic data and the likelihood of a rate increase by the Federal Reserve later this month.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that half of the experts it surveyed say rates will rise in the coming week. Elizabeth Rose, branch manager at Dallas-based Movement Mortgage, is one who says rates are headed higher.
“Expect continued volatility to put pressure on mortgage rates,” she said. “Mortgage bonds were in the process of attempting a recovery. However, some decent economic news the past few days have put a damper on those improvements.”

Higher rates have driven down mortgage applications, particularly those for refinances. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — sank 9.4 percent from the previous week. The refinance index tumbled 16 percent, while the purchase index inched down 0.2 percent.
The refinance share of mortgage activity accounted for 55.1 percent of all applications.
“Mortgage application volume in the Thanksgiving week dropped sharply to the lowest level since early January, as mortgage rates increased to their highest point since July 2015,” said Mike Fratantoni, MBA chief economist. “Refinance volume, which is very sensitive to rates, dropped more than 16 percent in the most recent week, with refinances of government loans dropping 30 percent for the week. On a seasonally adjusted basis, purchase volume was little changed last week.  However, the mix continues to shift towards higher balance loans, as the average purchase loan size reached a new survey record.  First-time buyers and buyers of lower priced units may have stepped away from the market to some extent given the jump in rates. It appears that many homebuyers rushed to get their applications two weeks ago as rates began to increase.”