Mortgage rates across the U.S. rose again this week, marking seven consecutive weeks of increases. According to Freddie Mac's weekly survey of the mortgage industry, the average rate for a 30-year fixed home loan rose to 4.16% during the week ending on December 16th. That's the highest it has been since October 2014.
Mortgage Chart Shows Big Rate Spike
If a picture is worth a thousand words, then the chart below should speak volumes. This chart shows mortgage rate trends over the last 12 months (from Dec. '15 - Dec. '16). The big spike over on the right side represents the last six or seven weeks. As you can see, average rates in all three loan categories have risen significantly since November.
This trend has caught the attention of lenders and borrowers alike. Clearly, the mortgage industry will have to adjust to a "new normal" as we head into 2017. For home buyers, this trend represents reduced affordability and creates a sense of urgency.
According to a Freddie Mac press release from December 15:
"As was almost-universally expected, the FOMC closed the year with its one-and-only rate hike of 2016. The consensus of the committee points to more rate hikes in 2017. However, the experience of this year combined with the policy uncertainty that accompanies a new [White House] administration suggests a wait-and-see outlook."
Meanwhile, the Mortgage Bankers Association (MBA) reported a drop in the number of mortgage loan applications. Last week, the MBA's Applications Survey showed declines in both refinance and purchase loan applications, which is partly due to the recent mortgage rate increases. If lending rates continue their upward climb, we can expect mortgage activity to be further reduced in 2017.
Looking Forward: Rising Rates and Home Prices in 2017?
While the past is easily measured, the future is more of a mystery. It's hard to say what mortgage rates will do as we move into 2017, especially in light of their recent volatility. But if the housing analysts and economists are correct, we could see a steady rise in rates throughout 2017.
The MBA recently predicted that the average rate for a 30-year fixed mortgage loan would start the year at 4.3%, and rise to around 4.7% by the end of 2017.
Home prices are also expected to continue rising next year, at least in most parts of the country. For home buyers, this adds to the urgency. Buyers who postpone their purchasing plans until later in 2017 could end up paying more for a home, and for a mortgage loan.
Disclaimer: Forecasts and predictions were provided by third parties not associated with this company. We've presented them here as an educational service to home buyers and homeowners.