This year has been quite the roller-coaster for mortgage rates, as we have seen rates go from the record three year- low to now being substantially higher and appearing to only continue to rise.
Things have not been looking up for the mortgage industry as rates have continued to rise – getting higher numerous times a day. According to data released by Freddie Mac, the 30-year fixed rate rose to an average of 4.16 percent, on Thursday. That same loan type was at 3.97 percent a year ago.
The 15-year fixed rate rose to 3.37 percent and the 5/1 Adjustable-rate mortgage (ARM) rose to 3.19 percent.
The projections for 2017 are not looking any better either. Fannie Mae is projecting that the rate for a 30-year fixed rate will hit 4.2% in 2017. Even worse, Freddie Mac is projecting that the rate for a 30-year fixed rate will hit 5.1% in 2017. While the Mortgage Bankers Association (MBA) projects the market will hit 5.2% in 2017 and the National Association of Realtors (NAR) is projecting the market will go above 5% in 2017.
This week, rates continued to go up for the seventh consecutive week. There has been a continuous increase in rates for the 30-year fixed rate, 15-year fixed rate and the 5/1 ARM.
According to Bankrate, 62.5 percent of panelist predict that the mortgage rates will rise over the next week or so, while 12.5 percent say they will fall. The remaining 25 percent predict that the rates will remain unchanged.
Rates went down to a 3-year low following the 2016 election.
What does this mean for lenders?
According to the latest data from the MBA, mortgage applications decreased this week. The market-composite index, which is a measure of the total loan-application volume, dropped 4 percent overall this week.
“Overall, the mortgage market remains resilient but is likely to plateau rather than grow much for the next couple of years,” said Paul Smee, Council of Mortgage Lenders director general.
The rates are negatively effecting refinance transactions more than purchases. The refinance index has dropped 4 percent, while the purchase index has dropped 3 percent.
Sean Becketti, Freddie Mac chief economist, said “However, the experience of this year combined with the policy uncertainty that accompanies a new Administration suggests a wait-and-see outlook. If rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017.”