Mortgage Rates: Higher for the Holidays

One week after experiencing their largest increase in three-and-a-half years, mortgage rates moved even higher, and surpassed 4 percent for the first time in more than a year, according to Freddie Mac’s Primary Mortgage Market Survey (PMMS) for the week ending November 23, 2016.

The average 30-year FRM climbed by 39 basis points for the week ending November 16, the largest weekly increase since June 2013 (the spike was dubbed the “Trump Tantrum” by some in the industry, a play on the “Taper Tantrum” from 2013). The increase of 9 basis points this week pushed the average 30-year FRM up to 4.03 percent—8 basis points higher than the same week a year ago, according to Freddie Mac. The average 15-year FRM climbed by 11 basis points up to 3.25 percent, an increase of 7 basis points from the same week last year.

"In a short week leading up to the Thanksgiving holiday, the 10-year Treasury yield rose 8 basis points,” Freddie Mac Chief Economist Sean Becketti said. “The 30-year mortgage rate followed suit, rising 9 basis points to 4.03 percent. This increase marks the first week since 2015 that mortgage rates have risen above 4 percent.”

While some are speculating that President-elect Donald Trump will not have a direct effect on the mortgage industry once he takes office in January, his election seems to already be affecting mortgage rates.

“The recent rise in mortgage rates is largely attributed to Wall Street optimism regarding Trump's proposals for increased infrastructure spending and tax cuts,” Redfin Chief Economist Nela Richardson said. “In short, Wall Street is now anticipating higher economic growth and inflation in 2017.”

The increase in mortgage rates above the 4 percent level apparently did not keep the homebuyers away—the MBA reported an increase of 5.5 percent in purchase application volume this week after reporting a decline of 9 percent last week—the week that rates spiked by 39 basis points. It was the largest weekly decline for mortgage applications in three years. This week, the higher mortgage rates did not discourage homebuyers.

“We expect rates will be higher in 2017 than the rock bottom rates of 2016,” Richardson said. “However, we don't expect that the rise in rates will be high enough to significantly affect consumers’ plans to buy or sell. There are a host of reasons why a family chooses to purchase a home. Rates are just one of them. In that sense, it's the economic basics of everyday life—job relocation, family changes, lifestyle preferences, desire for more highly ranked schools and shorter commutes—that continue to be the key drivers of a family's decision to buy or sell, regardless of who resides in the White House.”