Mortgage Interest Rates Hit 5-Month High
Dec 29th, 2017 @ 6:51 AM by Amber Nelson
The Trump tax bill and a rate hike from the Federal Reserve pushed long-term U.S. mortgage rates to their highest level since July, according to Freddie Mac, a sign that the economy is moving at a steady clip.
“As we expected, mortgage rates felt the effect of last week’s surge in long-term interest rates in the final, shortened week of 2017,” said Freddie Mac Deputy Chief Economist Len Kiefer. “…Although this week’s survey rate represents a five-month high, 30-year fixed mortgage rates are still below the levels we saw at the end of last year and early part of 2017. Mortgage rates have remained relatively low all year.”
The average rate on a 30-year fixed rate mortgage (FRM) jumped to 3.99% with an average 0.5 point during the week ended December 28, 2017, up from 3.94% the week before and the highest rate in 5 months, since the week of July 13 when it averaged 4.03%. One year ago, the rate was still much higher, at 4.32%.
Rates on the 15-year FRM surged as well, climbing to an average 3.44% with an average 0.5 point, up from 3.38 percent. Last year at this time the average rate was 3.55%.
The 5-year Treasury hybrid adjustable-rate mortgage (ARM) rose to 3.47% with 0.3 point, up from 3.39% and up from the previous year when it averaged 3.30%.
The rise in rates stems from investor optimism in the markets. In the middle of December, the Federal Reserve raised its target interest rate to a range of 1.25% to 1.5%, the third such rate hike this year after a long period of no increases. The Fed expects to raise rates another 3 times in 2018.
Comments from outgoing Fed president Janet Yellen also helped to raise expectations about U.S. economic growth. “At the moment the U.S. economy is performing well. The growth that we’re seeing, it’s not based on, for example, an unsustainable buildup of debt … The global economy is doing well, we’re in a synchronized expansion,” Yellen said. “There is less to lose sleep about now than has been true for quite some time, so I feel good about the economic outlook.”
Investors have also been looking to the recent passage of the President Trump tax bill, anticipating a spike in GDP and inflation. That enthusiasm has pushed 10-year Treasury bond yields lower and mortgage rates higher.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.