30-Year Mortgage Rate Hits 2-Year High as Post-Election Surge Persists

The key 30-year fixed-rate mortgage surged to a new high for 2016 this week to 4.13 percent, marking its highest level since October 2014, according to the latest data released Thursday by Freddie Mac.

The long-term rate has climbed 66 basis points in six weeks, boosted by the post-election selling spree in Treasuries. (A basis point is 0.01 percentage point.) The climb in mortgage rates is not expected to ease just yet as Federal Reserve policy makers, buoyed by a strong November jobs report and an overall solid economic recovery, are expected to raise their benchmark interest rate by a quarter-point.
The sharp jump in mortgage rates is partly the result of rising long-term bond yields. The 10-year Treasury, in particular, is one of best indicators of interest rates on mortgages. When prices of bonds go down from heavy selling, their yields go up — and so do interest rates to some degree.
“As rates continue to climb and the year comes to a close, next week’s FOMC (the Fed’s Federal Open Market Committee) meeting will be the talk of the town with the markets 94 percent certain of a quarter-point-rate hike,” said Sean Becketti, chief economist, Freddie Mac.
Meanwhile, mortgage applications have been flat, according to the latest update from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume — decreased 0.7 percent from the previous week. The refinance index dropped 1 percent, while the purchase index ticked up 0.4 percent.
The refinance share of mortgage activity accounted for 56.2 percent of all applications.
“Mortgage rates on 30-year loans have increased 50 basis points since the week prior to the election, hitting their highest level since October 2014, and causing refinance application volume to dip 28 percent to a new low for the year,” said Mike Fratantoni, MBA’s chief economist.
Here is Freddie Mac’s rundown of mortgage rates for this week:
30-year fixed-rate mortgage (FRM) averaged 4.13 percent, with an average 0.5 point for the week ending December 8, 2016, up from last week when it averaged 4.08 percent. A year ago at this time, the 30-year FRM averaged 3.95 percent.
15-year FRM this week averaged 3.36 percent, with an average 0.5 point, up from last week when it averaged 3.34 percent. A year ago at this time, the 15-year FRM averaged 3.19 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.17 percent this week, with an average 0.5 point, up from last week when it averaged 3.15 percent. A year ago, the 5-year ARM averaged 3.03 percent.

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