Mortgage rates rise in the shadow of the Fed’s rate hike

The figures are on a seven-week roll

Mortgage rates will fall someday. Just not this week. For the seventh week in a row, and the 10th time in 11 weeks, mortgage rates have gone up.

Mortgage rates haven’t had a down week since early September.

This week’s mortgage survey was conducted before the Federal Reserve announced a quarter-point increase in the federal funds rate. The timing makes little difference, because the Fed rate hike was universally expected.

“Rates have already jumped in anticipation of the Fed and higher inflation,” says Alan MacEachin, chief corporate economist for Navy Federal Credit Union. “The Fed now appears to expect slightly higher inflation over the next few years and is now forecasting a slightly faster pace of rate increases through 2019. This was not unexpected, and I don’t expect any immediate impact on mortgage rates.”

MORTGAGE RATES THIS WEEK

The benchmark 30-year fixedrate mortgage rose this week to 4.18 percent from 4.15 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 4.09 percent. Four weeks ago, the rate was 4.01 percent. The mortgage rates in this week’s survey had an average total of 0.21 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.78 percent. This week’s rate is 0.40 percentage points

The benchmark 15-year fixedrate mortgage rose to 3.42 percent from 3.40 percent.

The benchmark 5/1 adjustablerate mortgage was flat at 3.45 percent.

The benchmark 30-year fixedrate jumbo mortgage rose to 4.19 percent from 4.14 percent.

BACK TO WHERE WE STARTED

“Here’s what’s interesting, to put things in perspective,” says Whitney Fite, president of Angel Oak Home Loans.”We’ve kind of round-tripped rates in the last year.”

The 30-year fixed averaged 4.09 percent last December, and it’s averaging 4.17 percent in the first two weeks of this month.

Between Decembers, two events drove rates in either direction, Fite says.

”The first was Brexit. Rates just plummeted because of that. Then we had the Trump election, and we had rates skyrocket because of that.”

Mortgage people are focusing on what a Trump presidency means for interest rates and the industry in general, Fite says. Investors believe the Trump administration will cut taxes and spend freely, stimulating the economy and causing inflation and interest rates to rise.

WILL THE FED HIKE PRECEDE A FALL?

Sometimes, a Fed rate increase is followed by a drop in mortgage rates. The last time the Fed hiked short-term rates, in December 2015, mortgage rates rose for a couple of weeks, then plunged in January and early February.

“I think it is very likely that we will see some improvement” in mortgage rates, says Elizabeth Rose, branch manager for Movement Mortgage in Dallas. She believes investors will judge that the Fed is getting in front of inflation. If that’s the impression that investors have, then mortgage rates might fall a little. But Rose doesn’t think we will return to the pre-election mortgage rates of under 3.75 percent.

Federal Reserve Board Chair Janet Yellen called the central bank’s rate hike “a vote of confidence in the economy.”

In a news conference after the Fed’s rate decision was announced, Yellen said “households and firms will see very modest changes from this decision.”

The clearest change will happen to homeowners who carry balances on home equity lines of credit, or HELOCs.

Interest rates on HELOCs are tied to the prime rate, which went up a quarter of a percentage point immediately after the Fed’s decision was announced.

Rates on most HELOCs will go up by a quarter of a percentage point. Borrowers will see the change beginning in their February payment.

THINKSTOCK Mortgage rates haven’t had a down week since early September.