Mortgage Rates Now Higher Than Year-Ago Levels

December 3, 2015 No Comments »
Mortgage Rates Now Higher Than Year-Ago Levels

The headline reads something like this: Mortgage rates fall for third straight week.

But if you look at the bigger picture, mortgage rates are now higher than levels seen a year ago, per Freddie Mac’s survey.

This is the first time they’ve been higher on a year-over-year basis in a long, long time.

The benchmark 30-year fixed averaged 3.93% this week, which is slightly below the 3.95% average seen last week, but above the 3.89% average seen a year ago.

The same goes for the 15-year fixed and 5/1 ARM that Freddie also tracks.

I’ve watched the year-over-year numbers get closer and closer before finally falling below above current numbers.

So while rates rise and fall week-to-week, what might matter more is where they stand relative to last year and the year before.

In short, they’re higher than they’ve been for a long time, albeit only slightly. But this could signal a shift toward higher rates as they slowly march back to more historic norms.

We’ve been spoiled for a while now…

Rates Still Look Good, But Many Already Took Advantage

One thing to remember is that they’re still low and attractive to home buyers, which is certainly very important. My guess is that most people are happy to snag a sub-4% fixed rate on their mortgage when purchasing a home today.

But what about those looking to refinance? This is where that year-ago issue rears its ugly head.

When you consider the fact that interest rates are higher than they were last year, you’d think most people who could already refinanced. After all, how many people still have above-market rates?

Refinance numbers have been very high for years now but have since come to a relative crawl.

The only saving grace might be the many folks who are getting their heads back above water.

These previously underwater homeowners might be able to refinance next year for the first time in years thanks to rising home prices.

Per Zillow, some one million homeowners were “freed from negative equity” during the third quarter of this year alone as the negative equity rate fell a full percentage point from 14.4% to 13.4%.

Those who haven’t been able to take advantage of programs such as HARP might now be able to lower their rate via a traditional rate and term refinance.

And let’s not forget that the negative equity remains at a lofty 13.4%. That means there are still millions of homeowners in the eventual refinance pipeline, assuming home prices continue to climb and rates remain low.

Also, the National Association of Realtors expects existing home sales to hit 5.30 million this year and 5.45 million in 2016.

This will mark the highest total since 2006, when the housing market was chugging along at a steady clip.

So despite mortgage rates finally being higher than a year ago, they’ll still remain very attractive for a lot of Americans and there’s no need to panic when headlines of rising rates begin to flood the airwaves.

There’s also a chance rates could fall in 2016 considering all the stuff happening at the moment.

By the way, come January 1st, 2016, Freddie Mac will no longer provide weekly survey results for the 1-year ARM. It had been tracked since 1984.

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