On Thursday, December 15, Freddie Mac reported that mortgage rates rose again in their latest industry survey. But that’s just the tip of the iceberg. As shown in the 2016 mortgage rate chart below, home loan rates in three categories have risen for the last seven weeks in a row and are now at their highest point of the year.
If that weren’t enough to light a fire under would-be home buyers, the Federal Reserve recently announced that it would increase the short-term federal funds rate for only the second time in a decade. Indirectly, this could lead to even higher lending rates in 2017. Borrower beware.
Mortgage Rate Chart Shows Late 2016 Surge
Freddie Mac published the 2016 mortgage rate chart shown below earlier today, along with the results of their latest weekly survey of the mortgage industry.
If a picture is worth a thousand words, then this chart speaks volumes. A couple of things will jump out at you right away. The first is the large spike in mortgage rates, shown on the right side of the chart. That surge took place over a six-week period that began in mid-November. You’ll also notice that rates are higher today than they were at the start of 2016.
Mortgage rate chart fast facts:
- The average rate for a 30-year fixed mortgage loan rose three basis points (0.03%) this week to land at 4.16%. That’s the highest it has been since October 2014.
- It bears repeating: 30-year mortgage rates haven’t been this high in over two years.
- The average rate for a 15-year fixed home loan rose to 3.37% this week. It is also at its highest point of the year.
- Borrowers paid an average of 0.5 points (a.k.a. discount points) in order to secure these rates. This is a common strategy used to reduce total borrowing costs over time.
Not surprisingly, the Mortgage Bankers Association reported a drop in home loan applications yesterday. According to their data, total application volume declined by 4% (on a seasonally adjusted basis) last week from the previous week. Clearly, this “new normal” for mortgage rates is pricing some buyers out of the market, and closing the window of savings for homeowners who are trying to refinance.
As we enter 2017, the mortgage industry will have to adjust to the effects of rising rates shown in the chart above.
Rising Home Prices Add to the Urgency
Surely, home buyers are feeling a sense of urgency right about now. The recent surge in mortgage rates has caught everyone’s attention, lenders and borrowers alike. But that’s not the only concern for buyers. Rising home values are creating a “double whammy” situation by further reducing affordability.
In most cities across the country, home prices rose steadily over the last year. And they’re expected to rise further in 2017, though possibly at a slower pace. According to the real estate data company Zillow, home prices nationwide rose by 6.2% during 2016. Looking forward, the company’s economists expect house values to rise by around 3% in 2017.
The message to home buyers is clear: You might want to think about buying sooner, rather than later.
Disclaimer: This story includes a 2016 mortgage rate chart provided by Freddie Mac. This chart shows averages based on a survey of about 125 lenders across the country. Individual loan rates vary based on a variety of factors, including borrower credit scores, the type of loan being used, etc.