Mar. 16, 2018.
Mortgage rates have risen for nine weeks in a row, according to the results of Freddie Mac’s Primary Mortgage Market Survey® (PMMS®). As of March 8, 2018, the 30-year fixed mortgage rate rose to 4.46 percent, up from 4.43 percent the week before and the highest it had been since January 2014. But as of March 15, 2018, mortgage rates dropped for the first time this year — declining slightly from the 30-year fixed mortgage rate high of 4.46 percent to 4.44 percent for the week. Even with this first-time dip for 2018, most market analysts expect mortgage rates to continue to increase in the coming months.
The Freddie Mac PMMS also shows:
- The 30-year fixed-rate mortgage (FRM) average of 4.44 percent, with a 0.5 point average for the week of March 15, 2018, was higher than the 30-year FRM averaged at 4.30 percent from one year ago.
- The 15-year FRM for the week averaged at 3.90 percent, with a 0.5 point average, rising from an average of 3.94 percent from the previous week and an average of 3.50 percent from one year ago.
- The average for the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was 3.67 percent, with a 0.4 point average, rising from an average of 3.63 percent from the previous week and an average of 3.28 percent from one year ago.
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Rising rates are the sign of a healthy economy: Loan officers say ‘buy now’
Everett Elstak of Crestmark Mortgage Company, an affiliate of Cornerstone Home Lending, says weeks of rising rates are an indicator of continued improved economic projections.
“The bond market holds the key to mortgage interest rates,” Elstak says. When the bond market values increase, mortgage rates tend to decrease. Bond markets normally increase in value when the stock market shows declines.
Investors pull away from the stock market when they see unfavorable geo- and political-economic news, Elstak says.
Seeing declines in the stock market can lead to increases in the bond market and subsequent declines in mortgage interest rates, and vice versa, explains Elstak. “So, the time to buy is now as we do expect continued stock market growth and continued bond market declines that will result in increased mortgage interest rates.”
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3 action steps to take when mortgage rates ‘won’t stop’ rising
Rising mortgage rates may not show signs of stopping, but economists consider buyer demand to be strong. As the health of the economy builds, wages increase. Currently, wages are growing at the fastest pace they have in over eight years. This can make it possible for more first-time buyers to afford a house and for more homeowners to trade up or move to a new area.
For prospective buyers and for homeowners considering a refinance, there’s no reason to wait. Loan officers suggest taking these steps before mortgage rates rise again:
1. Stop renting.
Renting can be useful as a short-term or long-term solution, depending on personal circumstances, but it won’t protect against the recent rises in mortgage rates, Rudy Del Rio of Cornerstone says. Rents will also follow suit with the market. “Bottom line: Everything will go up together,” he explains.
Landlords’ payments will rise related to taxes from the housing appreciation tied to increasing mortgage rates, and that will get passed on to the renter, says Del Rio. Again, these are all signs of a stronger economy. “Secure your home now while rates are low and before home prices increase, and if rates fluctuate back down, a homeowner can always refinance.”
2. Make an investment.
Del Rio says it helps to remember that markets are cyclical. He compares the “long game” of mortgage interest rates to an investment in a 401(k).
To the first-time buyer or homeowner hoping to sell, loan officers suggest:
- Interested buyers and homeowners should look into getting prequalified now, no matter what type of loan they may be eligible for. Getting prequalified for a mortgage is the first step in buying a house and can help a buyer determine how much they can afford at the current mortgage interest rate.
- Those ready to buy a house should take advantage of the current market. At the end of the day, Del Rio says, this may be the very last time for the next several years that a buyer can create a plan with their loan officer based on their financial goals and lock in a historically low rate.
3. Consider refinancing.
Elstak says buyers and homeowners are seeing a new normal when it comes to conventional and government loan rates. Compared to the old “normal” average of 3.250 percent for government loans and average of 3.875 percent for conventional loans, rates have risen to an average of 4.375 percent and an average of 4.875 percent, respectively. As mortgage rates climb, homeowners with ARMs may save money in the long run by refinancing to a fixed-rate.
This is because an adjustable-rate mortgage is subject to two factors:
- The margin – The fixed percentage of the ARM rate.
- The index – Based on various indices like the LIBOR (London Interbank Offered Rate) and the Treasury Bond. Elstak says, “These indices are variable, and they record the historic averages. As we see the ‘new normal’ coming, we will also see the indices increasing.”
As Elstak explains, mitigating these adjustable factors by refinancing an ARM to secure a fixed-rate mortgage could protect against rising costs associated with higher interest rates.
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When fixed mortgage interest rates increase, so will ARM rates. Del Rio also suggests, primarily for homeowners who are in an ARM and who have owned their home for several years, converting to a fixed mortgage rate in this limited window of opportunity. With the current market trend moving upward, Del Rio predicts homeowners may not see a down trend in the market for another 10 years or longer. “Locking a permanent rate for the upcoming years where the home should be paid off is savvy and highly encouraged by myself.”
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For educational purposes only. Please contact a qualified professional for specific guidance.
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