Published: Sun, December 04, 2016
Business | By Patricia Jimenez

Mortgage rates climb even higher

Mortgage rates climb even higher

They aren't arbitraging (rates and loans) anymore. But since Donald Trump's victory, they have been on a tear.

The majority of the top 100 largest housing markets across the country improving steadily between August and September, while helping to produce the best year in homes sales in a decade, according to a new report Wednesday from mortgage capital provider Freddie Mac (OTCQB: FMCC) of Tysons Corner, Virginia. “Factoring in low mortgage rates and modest income gains, house prices still have some room to run, as indicated by the MiMi payment-to-income indicator which is almost 33 percent below its historic benchmark.

The 30-year fixed-rate mortgage averaged 4.08% in the week ending December 1, up from 4.03% in the prior week. It climbed to 2.45 percent Thursday morning, its highest level since July 2015.

The rate on 15-year home loans, a popular choice for people who are refinancing, jumped to 3.34 percent from 3.25 percent.

Fannie surged 32% to $4.12, the biggest increase since April, while Freddie was up 32% to $3.99. The 30-year fixed-rate is up from 4.03 percent last week-the first time rates exceeded 4 percent this year. The five-year ARM hasn't been this high since late January 2014. Higher inflation is propelling higher rates, as well as expectations that the Federal Reserve Open Market Committee will raise the federal funds rate later this month.

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The report found that the Federal Open Market Committee will more than likely push short-term interest rates higher a couple of times in 2017 due to the increase in employment and the rise of inflation. "We expect the unemployment rate to drift down throughout 2017 as the economy continues to add more jobs". "Mortgage bonds were in the process of attempting a recovery".

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

If the TBA market were disrupted by the removal of that guarantee, it could cause home mortgage rates to skyrocket and constrain the range of borrowers that could find affordable loans. "Mortgage market activity will be significantly reduced by higher mortgage rates, especially refinance originations, which are likely to be cut in half".

Freddie's Chief Economist Sean Becketti said that mortgage rates rose as Treasury yields remained flat.

The two so-called government-sponsored enterprises, or GSEs, help the USA housing finance market by buying the mortgage loans made by banks, freeing up space on lenders' balance sheets to generate more loans. On a seasonally adjusted basis, purchase volume was little changed last week. "It appears that many homebuyers rushed to get their applications two weeks ago as rates began to increase".

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