Towards the end of 2016, following the presidential election, the mortgage industry saw a dramatic increase in rates. It appears that the rates might decrease in the new year, as they are down for the second week in a row for 2017.
This is great news for the home buyers or homeowners looking to refinance, as rates rose 12 out of the last 13 weeks of 2016. In September, the 30-year fixed rate mortgage was averaged at 3.54 percent and is now more than a half a percentage point higher after the continual rise in rates at the end of last year.
A modest rise in mortgage applications for the purchase of homes has accompanied the decrease in rates over the last two weeks. The Federal Housing Administration has announced that it will cut the cost of mortgage insurance premiums.
Purchase mortgage applications were up 6 percent last week compared to the week prior to that, according to the Mortgage Bankers Association. Another development this week that could spark more interest in the mortgage industry was the announcement that FHA-insured mortgages will now cost less.
The rates are now back to where they were in early December 2016. While the purchase market saw a 6 percent increase, the refinance market still managed to see a 4 percent increase. The refinance share accounted for 51.2 percent of all mortgage applications.
The home loan rates tend to follow the movement of long-term U.S. Treasuries.
The yield on a 10-year Treasury peaked at 2.6 percent in mid-December, but dropped to 2.38 percent this week.
“After absorbing a mixed December jobs report, the 10-year Treasury yield fell eight basis points,” Sean Becketti, Freddie Mac’s chief economist, said in a statement. “The 30-year mortgage rate moved in tandem with Treasury yields falling eight basis points to 4.12 percent, the second decline since the presidential election. The December jobs report showed 156,000 jobs added, barely meeting many experts’ expectations, while wage growth was at the high end of expectations at 0.4 percent. If strong wage gains persist, they may push inflation and interest rates higher.”
Experts surveyed believe the rates will remain at a pretty constant level for this week.
“Even with some volatility in the market, the mortgage rate is pretty much at the same level as four weeks back,” said Shashank Shekhar, chief executive of Arcus Lending in San Jose. “In the absence of any market moving reports, I don’t expect any major movement this week.”