Mortgage Rates Rise, Regulation in the Crosshairs

Mortgage Rates Rising

In the week following the presidential election on November 8th, the average rate of a 30-year-fixed rate mortgage jumped 40 basis points, from 3.57% to 3.94%. During the same period, The Mortgage Bankers Association reported a 9.2% in mortgage applications. Rates on 15-year fixed-rate mortgages, popular with refinancing homeowners, rose from 2.88% to 3.14%, causing the Refinance Index to fall 11% from the previous week to its lowest level since March 2016. Homeowners and shoppers seem to think rates will continue rising. Is this an overreaction, or do they have good reason to be concerned?

Interest Rates, Regulation

With the yield on 10-year Treasury notes rising from 1.85% to 2.24% in the week following the election and the dollar strengthening rapidly, the consensus seems to be that the Federal Reserve will be forced to raise interest rates quicker and more vigorously than was previously expected. The fed-funds futures market, which tracks the probability of an interest rate hike, puts the probability of an increase in rates in December at 86%. If the markets continue to surge higher, interest rates and mortgage rates will continue to rise and lender volume is likely to drop.
On a brighter note, many predict that the Trump administration will be more bank and lender friendly than his predecessor’s. The Mortgage Bankers Association has publically stated that they hope Trump will appoint a “more reasonable” attorney general who will ease the burden of regulations under the Dodd Frank Act and give small banks and lenders greater leeway.

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