This is the first drop in the 30-year fixed rate since the presidential election.
Potential new spending and tax cut plansproposed by Donald Trump, along with a rate hike from the Federal Reserve sent the interest rate on the U.S. government's 10-year Treasury note surging in the weeks after November 8.
Treasury notes serve as a benchmark for various types of credit, including mortgages. When rates move higher, it becomes more expensive to borrow money.
But it seems the hype might have started to wear off in the bond market. Bond yields dropped last week.
"It was a run up that was based on euphoria that we are going to see fiscal stimulus and that brings about faster economic growth," said Greg McBride, Bankrate's chief financial analyst. "But there has been a lot of that priced into that run up, and the reality is even if we do get fiscal stimulus that money might not hit the economy in 2017."
The higher rates have had an effect on the mortgage market recently, particularly refinancing activity. The number of mortgage applications dropped 12% from two weeks ago, according to the Mortgage Bankers Association, while its Refinance Index tumbled 22%.
But the bond market can be volatile, noted Len Kiefer deputy chief economist at Freddie Mac
"We are going to have to wait and see if this is an ongoing trend," he said.
McBride expects mortgage rates to gyrate throughout the year, but not to climb above 4.5%. "A trip below 4% is very likely in the event of an economic stumble or a market selloff."
Despite the recent rise, rates are still very low by historic standards.
But home prices have been rising thanks to limited inventory, so even slightly higher rates could affect potential buyers' budgets.
This time last year, the average rate was 3.97%.
"We are up about a quarter point where we were January 2016, and that will impact affordability negatively and make it more difficult for prospective home buyers," said Kiefer.
Author:John and Ashley Lazosky Phone: 702-281-1198 Dated: January 13th 2017 Views: 334 About John and Ashley: We are the Broker/Owners of Vegas Homes and Fine Estates. We are proud to say we have a combined 22...
View our latest blog posts in your RSS reader. Click here to access.
Vegas Homes and Fine Estates has over 15 years combined experience in the Real Estate industry AND have represented 100’s of buyers and sellers helping them realize their real estate dreams. As Broker/Owner of Vegas Homes and Fine Estates, I have consistently ranked in the top 1% of agents in the Las Vegas Valley. Combined with my husband and partner JOHN, we are an UN-Stoppable FORCE in the Vegas Real Estate MARKET!!! With complete knowledge of the Las Vegas marketplace and personalized client services… you can expect your home buying needs will be serviced properly and protected.
We strive for perfection here at Vegas Homes and Fine Estates and look forward to speaking with you about the Vegas real estate market !!
1. Prices Will Continue to RiseCoreLogic’s latest Home Pri
"I can't say enough about John and Ashleys combined knowledge, experience and integrity. When they sold us our house they were able to respond quickly and show me the property. They guided us through the short sale process and were able to negotiate an $18K dollars off the banks asking price. IF you want an agent that works Real Estate as a professional and not just a hobby, then I think you should call John and Ashley. You'll be happy that you did. "