John Seggerman

Mortgage Rates Are Seeing a Sustained Rise

Mortgage rates have risen in nine out of the last ten weeks, which could signal even higher rates in 2017.


Falls Church, VA -- (ReleaseWire) -- 12/19/2016 --According to Freddie Mac's Primary Mortgage Market Survey® (PMMS®), interest rates on 30-year fixed mortgages have risen in nine out of the last ten weeks, with the result that it is now 4.16 percent. While potential home buyers should not let this fact exert too much influence over their decision-making for the time being, it is important to note that many analysts forecast that mortgage rates will rise even higher in 2017. So locking in at the current rate could be a good idea.

In brief, mortgage rates had been rising for more than a month before the U.S. presidential election, but Donald Trump's surprise win caused them to surge upwards to leave them more than a third of a percentage point higher than the 52-week average. This is mainly due to market expectations of tax cuts combined with increased spending on infrastructure, which could cause increased inflation. Since increased inflation eats into the value of long-term bonds, such investors will want lower prices and higher returns to make up for that lost value, which in turn, means higher interest rates on mortgages.

Furthermore, as expected the Federal Reserve raised its benchmark rate this month, which will affect other interest rates throughout the U.S. economy. While the direct impact of this change on mortgage rates is minor, they would signal to the market that the Federal Reserve is expecting a strong economy going forward. This means more spending and thus more inflation. As a result, this would strengthen the expectations of bond investors, thus exerting a similar effect on mortgage rates.

That said, it is important to note that 4.16 percent on 30-year fixed mortgages is not that high in a wider context, seeing as how the same rate was 4.01 percent no more than a year ago. In fact, it is not all that far from the lowest rate on record of 3.31 percent in November of 2012. This historical continuity could be due to the strong U.S. economy in 2016 compared with the struggles of other industrialized countries' economies. As a result, potential home buyers should not let this trend panic them into buying something that they are not ready for. However, those who know that they will be buying housing sometime in the near future might want to lock in their mortgage rates sooner rather than later because these changes can still mean a difference of hundreds of dollars and in some cases, thousands of dollars, in the total costs of their future homes. For help in these tumultuous times, the advice of a good realtor is priceless.

Realtor John Seggerman's website is packed full of fantastic (free) advice, on just about every real estate topic under the sun, just follow this link.