Mortgage rates took their biggest jump the day after the November 2016 election, and continued to rise in the days following. Rates took another small jump when the Federal Reserve, otherwise known as the “Fed”, announced their first short-term rate increase in a year, on December 14, 2016. This is a typical over-reaction to Fed short-term rate changes. After the Fed’s announcement, and after the presidential inauguration, rates declined a bit, until spiking again in March, around the same time that the Fed announced a second short-term rate increase. And once again, rates settled DOWN after the March Fed announcement, and continued to slowly slip lower until reaching a summertime low in August. Rates today are only slightly above the lows they reached in the summer.
The Fed is expected to raise their short-term rates a little again this December, but that is not expected to have any long-term effect on mortgage rates. The Fed has also been stimulating the economy for the last several years since the Recession, by working to keep interest rates low, by buying Treasury Bonds and Mortgage Backed Securities. They have announced that they are curtailing this stimulus effort, and plan to slowly sell off the securities they’ve accumulated. As long as this is done at a slow pace over the next few years, we should not see any big interest rate spikes due to this switch in policy. Inflation is the biggest threat to low mortgage rates, and the inflation rate has remained quite low, in spite of the expanding economy, the rising employment rate, and the bullish stock market. Note: The above trend chart is provided for evidence of trends only, and is not an offer of, or advertisement for, mortgage rates. The chart tracks the typical 30-year Conforming fixed rate single-family purchase loan, for someone with very good credit. Some mortgages rates like Jumbos would be higher, while some mortgages like FHA and VA might be lower.
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Thanks for your interest,
Dan Marchiando, your California Mortgage Broker and Loan Officer