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2017 starts out with falling mortgage rates

The new year started off on a high note, as interest rates fell for the first time since the presidential election in November.
1/9/2017 3:50:44 PM

The new year started off on a high note for prospective homebuyers, as interest rates fell for the first time since the presidential election in November, according to Freddie Mac's Primary Mortgage Market Survey. However, it's also the first time in three years that the calendar year opened with rates higher than 4%.

According to Freddie Mac:

  • The average 30-year fixed-rate mortgage was 4.2%, down from 4.32% the week before.
  • The average 15-year fixed-rate mortgage was 3.44%, down from 3.55% the week before.

The PMMS reported the 5/1 adjustable-rate mortgage had increased 3 basis points, ending at 3.33% compared to 3.3% the week before. However, Bankrate found that all three main mortgage types decreased during the week ending January 5:

  • The 30-year fixed-rate mortgage was 4.06%, down from 4.16% the week before.
  • The 15-year fixed-rate mortgage was 3.21%, down from 3.34% the week before.
  • The 5/1 adjustable-rate mortgage was 3.42%, down from 3.5% the week before.

Trump and the Treasury yield

CNN Money explained that there were two key factors in the recent increases in mortgage rates. First, Donald Trump's election means policy changes are bound to happen in the near future. This caused the Treasury yield to increase. The Treasury yield plays a big role in determining mortgage rates. And second, the Federal Reserve's decision to increase the federal funds rate also inspired rising residential mortgage rates.

Freddie Mac pointed out that the increases have had a notable effect on the housing market, and the refinance market in particular. The Mortgage Bankers Association reported a 22% decrease in refinance activity this week.

Now that several weeks have passed both since Election Day and the latest rate hike, the immediate ripple effects have begun to die down.

"It was a run up that was based on euphoria that we are going to see fiscal stimulus and that brings about faster economic growth," Greg McBride, Bankrate's chief financial analyst, said, according to CNN. "But there has been a lot of that priced into that run up, and the reality is even if we do get fiscal stimulus that money might not hit the economy in 2017."

In the weeks to come, industry experts have differing predictions about where rates will go. According to Bankrate's Rate Trend Index, 36% of survey respondents believe rates will stay the same, and the same percentage think they have a chance to decrease. The remaining 28% foresee an increase.

For prospective buyers, taking the chance to close on a mortgage while rates are still low could result in potential savings down the line.

Academy Mortgage is one of the top independent purchase lenders in the country as ranked in the 2015 CoreLogic Marketrac Report. Visit www.academymortgage.com to find a loan, get a rate, or calculate your payment today.