Mortgage rates jump to a new high for 2016
No slump in sales likely, but refinancing business is hurting
Mortgage rates ticked up to a high for 2016 as anticipation of higher inflation under President- elect Donald Trump’s administration and a Federal Reserve interest rate hike next week drove the cost of borrowing higher.
Amid the prospect of a more vibrant economy and more rapidly rising prices, lenders are raising borrowing costs. The average interest rate for a 30- year fixedrate mortgage rose to 4.13% for the week ending Thursday, up from 4.08% in the previous week, according to Freddie Mac.
An increase of that amount equals a payment of about $ 6 more per month on a 30- year, $ 200,000 mortgage.
The average rate for a 15- year mortgage rose to 3.36% from 3.34% last week, and a five- year adjustable mortgage jumped to 3.17% from 3.15%.
“When you’re buying a home, rising rates make a big difference in your budget,” said Greg McBride, chief financial analyst for Bankrate. com.
But don’t expect home- buying to cool off, in part because buyers outnumber sellers.
There’s “such limited inventory, we have multiple offers on properties at the same time,” said Dave Liniger, CEO of brokerage franchisor RE/ MAX. “This won’t discourage very many people.”
Refinancing is another story. Higher borrowing costs have crimped mortgage refinancing in recent weeks, according to Mortgage Bankers Association data. Many industry observers say the refinancing market has collapsed.
“Prime rates have gone up, especially on variable- rate mortgages, and that’s why refinancing has gone down,” said Ellie Mafi- Kreft, clinical assistant professor of business economics at Indiana University.
Taking the long view, rates are still relatively low. The annual average rate from 1972 through 2011 was higher than current rates, according to Freddie Mac.