Average US rate on 30-year mortgages rises to 3.97 percent

23 Dec 2015 | Author: | No comments yet »

Average US rate on 30-year mortgages rises to 3.97 per cent; 15-year loan up to 3.22 per cent.

WASHINGTON – Average long-term U.S. mortgage rates rose slightly this week in the days before the Federal Reserve announced a historic increase in its key short-term interest rate. Interest rates on home loans are expected to move higher throughout the coming year following Wednesday’s announcement by the Fed that it was raising its benchmark rate.

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed mortgage rates ticking slightly higher for the second week in a row amid the Federal Reserve’s decision to raise short-term interest rates for the first time since 2006. Mortgage buyer Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage edged up to 3.97 per cent from 3.95 per cent a week earlier. You have an opportunity here in the next six months to take advantage of still very, very historic low mortgage rates,” said Emerson, also chairman of the Mortgage Bankers Association. “Based on what … [the Fed] telegraphed, we don’t really see a significant shift in 2016.” Central bankers indicated four rate hikes next year.

The government-backed mortgage finance company aggregates current rates weekly from 125 lenders from across the country to come up with national average mortgage rates. The 30-year fixed-rate average rose to 3.97 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.95 percent a week ago and 3.8 percent a year ago.

Evaluating where you stand now, and how your housing budget could be affected when mortgage rates do go up, could save you thousands of dollars in interest costs. Right now, the share of adjustable-rate mortgages in the US market is near a record low—around 5%, according to data from the Federal Housing Finance Agency. They’re pretty much in the same place they were 12 months ago,” Emerson said, despite the Fed’s “over-telegraphed move” of a quarter of a percentage point increase in the fed funds lending rate. Even that small of an increase can make it more difficult for borrowers to qualify for a loan. “Based on analysis of loan-level ratios for a large sample of loans approved in the first half of this year, as much as 7% of mortgage applicants would have failed to get approval as a result of higher debt-to-income ratios caused by higher rates,” Smoke says. With the Fed delivering exactly what was expected – a quarter-point rate hike now and a pledge of a gradual pace going forward – there was a ho-hum reaction in the government bond market, with no sharp moves in mortgage rates likely at this point.

The 15-year fixed-rate mortgage increased to 3.34 percent from 3.27 percent this week, while the 5/1 adjustable was virtually unchanged at 3.42 percent, according to Bankrate. “If you’re in an adjustable rate, floating mortgage, and thinking about getting out of that, now is exactly the time to do that,” Emerson said, while reminding homebuyers that adjustables have been a great deal in recent years as the Fed kept the funds rate near zero percent since December 2008. A separate hypothesis was that, with long-term interest rates already low compared to short-term ones, people simply preferred taking on fixed-rate mortgages. The Fed policymakers coupled the hike with a signal that further increases likely will be made slowly, as the economy strengthens further and inflation rises from undesirably low levels. The survey is complemented by Bankrate’s weekly Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next seven days. He attributes that trend to some apprehension but largely to education. “I still believe people out there think they have to have 20 percent down to buy a home.

What to do now: Improving your credit score will help earn you a lower mortgage rate, and that’s even more important when interest rates are rising. We are likely to see some short-term volatility in fixed-income markets as market participants adjust to these new tools.” Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Bankrate provides consumers with proprietary, fully researched, comprehensive, independent and objective personal finance editorial content across multiple vertical categories including mortgages, deposits, insurance, credit cards, and other categories, such as retirement, automobile loans, and taxes. The Bankrate network includes Bankrate.com, CreditCards.com, InsuranceQuotes.com and Caring.com, our flagship websites, and other owned and operated personal finance websites, including Interest.com, Bankaholic.com, Mortgage-calc.com, CreditCardGuide.com, CarInsuranceQuotes.com, Insweb.com, CreditCards.ca, and NetQuote.com.

In-city moves will be easier, but upgrading to a larger or newer home will require consideration not just of a higher price, but also the impact of a likely higher interest rate. Bankrate develops and provides web services to over 100 co-branded websites with online partners, including some of the most trusted and frequently visited personal finance sites on the Internet such as Yahoo!, CNBC, and Bloomberg. In addition, Bankrate licenses editorial content to over 500 newspapers on a daily basis including The Wall Street Journal, USA Today, The New York Times, The Los Angeles Times, and The Boston Globe. To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/bankrate-mortgage-rates-nosed-higher-leading-up-to-fed-hike-300194351.html If it’s been a few years since you bought or refinanced your home, you’ll want to compare your current interest rate to today’s mortgage rates to see if refinancing makes sense.

If you currently have an adjustable-rate mortgage and plan to stay in your home for several more years, it’s time to consider refinancing into a fixed-rate loan. If you don’t need the ongoing availability of your equity reserves, you could lock in a final equity draw with a conversion to a fixed-interest loan at current low rates. If that option isn’t available to you, consider doubling up on your principal-reduction payments while rates are still low, or investigate the possibility of refinancing the HELOC balance into your primary mortgage.

But as famous investor John Templeton said, “The four most dangerous words in investing are, ‘This time it’s different.’ ” No one can predict an economic cycle and how it will unfold — or unravel. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers’ own, as is responsibility for the content of their blogs.

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