Mortgage rates are tied to the bond market in the United States because they serve as a kind of benchmark for credit. And in the wake of the presidential election the bond market is reacting by pushing the rate up on the 10-year Treasury note. The higher yield that investors love means a rise in mortgage rates. A 10-year Treasury note closed at 1.85% November 8th. Only one week later, a note closed at 2.24%.
There has been a corresponding rise in the mortgage interest rates. Though the increase is small, it means more money out of your pocket every month in a higher mortgage payment. For example; a jump of only %0.37 per cent on a $300,000.00 mortgage (60K down 30 year 3.94%) would mean a payment of $1, 138.00. And the same mortgage at 3.57% would give you a payment of $1,087.00. So, that little bump is worth $51.00 a month. And what would one full percentage point cost? How about $1,226.00 or $139.00 a month. As you can see, a little hike can make a big different over the life of your mortgage.
Just the thought of paying higher rates are influencing the market. Take a look at this quote from Mortgage Bankers Association news release dated 11/16; “The Market Composite Index, a measure of mortgage loan application volume, decreased 9.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 10 percent compared with the previous week. The Refinance Index decreased 11 percent from the previous week to its lowest level since March 2016.”
What all that means is simple. Less people are applying right now, thinking that the rates will be higher than if they wait for the market to cool down again and for rates to drop again. This could be a costly error. Yes, rates are ticking up, however, we are still enjoying historically low mortgage rates. So, take advantage and get moving on that loan now!
The Federal Reserve will be meeting in December. It is this time that they are expected to raise the federal funds rate. In a 11/02 Reuters article, they speculate that the Feds have set the state to raise rates in December. “That suggests the bar is low for a rate increase at the Fed’s final policy meeting of the year in mid-December, which has largely been factored in by financial markets.”
Still not sure which way the market will go? You are not alone. Check out this article from HousingWire. Here is a snippet; “Perhaps most uncertain about a Trump presidency is what will happen to housing markets because of policy change,” Trulia Chief Economist Ralph McLaughlin said. “Trump hasn’t much discussed housing policy during his campaign, but he has hinted to ‘Make America Great Again’ by boosting the homeownership rate through demand-side policies, such as financial deregulation, rather than through supply-side policies such as reducing local impediments to new supply.”
Tricia Houston, owner
Lending Maven Mortgage
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