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Mortgage rates rise for the first time in 2017

For the first time in 2017, mortgage rates edged higher during the week ending Jan. 26.
1/30/2017 11:21:50 AM

For the first time in 2017, mortgage rates edged higher during the week ending Jan. 26, according to Freddie Mac's Primary Mortgage Market Survey. But while the closely watched fixed-rate mortgages rose, adjustable-rate mortgages fell slightly.

According to Freddie Mac:

  • The average 30-year fixed-rate mortgage ended at 4.19%, up from 4.09% the week before.
  • The 15-year fixed-rate mortgage came to 3.4%, up from 3.34% the previous week.
  • The 5/1 adjustable-rate mortgage landed at 3.2%, down from 3.21% seven days earlier.

A similar pattern was reflected by Bankrate's data, with a slight variation in the direction of adjustable-rate mortgages:

  • The 30-year fixed-rate mortgage ended at 4.08%, up from 3.99% the week before.
  • The 15-year fixed-rate mortgage came to 3.21%, up from 3.16% the previous week.
  • The 5/1 adjustable-rate mortgage landed at 3.32%, up from 3.31% the week prior.

Economic indicators

Like Freddie Mac's 30-year mortgage, Treasury yields also rose 10 basis points during the week ending Jan. 26. Reuters reported it reached 2.555% Jan. 26, its highest peak in several weeks. However, it decreased to 2.508% later on. Many industry experts are looking to President Donald Trump's transition to the White House for clues on how the economy will fare in the coming months.

"Stock increases usually pushTreasury yields up."

"The new administration is a big change from the previous one," Boris Rjavinski, senior rate strategist at Wells Fargo Securities, told Reuters. "Political risks have pushed yields up and down."

Some of Trump's moves during his first few days in the White House have influenced investors' views of the economy. The stances he's taken on immigration and trade caused some to speculate that inflation will increase. Meanwhile, Trump's efforts to bolster business investments at home prompted some investors to decrease their Treasury holdings.

These factors likely contributed to the historic benchmark the Dow reached Wednesday, Jan. 25, when it rose to 20,000 for the first time. CNN Money reported this mark points to just how much the economy has improved over the past eight years. The Dow fell to its lowest point in March 2009, when it descended to 6,440.

How residential mortgages are affected

When stocks like the Dow Jones increase, bond prices generally fall. Dropping bond prices usually push Treasury yields up. And when Treasury yields increase, conventional mortgage rates typically follow suit.

In the week ahead, half of the industry professionals who contributed to Bankrate's Rate Trend Index said mortgages will likely go up. Several pointed to the soaring stock market as fuel for mortgage rates.

Freddie Mac pointed out that mortgage rates aren't the only determining factor in a home's affordability. It also comes down to supply and demand; fewer homes or more people hoping to make a purchase can both push home prices higher.

The most recent existing-home sales update from the National Association of Realtors reported housing inventory dropped more than 10% in December. The 1.65 million existing homes represent the lowest inventory level the NAR has seen since it began keeping tabs on this market in 1999.

Freddie Mac's Chief Economist Sean Becketti commented that this is "a factor that should support higher house prices regardless of the oscillations of the mortgage rate."

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