Freddie Mac: Mortgage Rates Ticked Up Slightly

Due in part to the Federal Reserve's decision to start raising short-term interest rates, fixed mortgage rates edged higher during the week ended Dec. 17, according to Freddie Mac's Primary Mortgage Market Survey.

Still, officials at Freddie Mac are forecasting that mortgage rates will remain near historic lows in 2016.

As of Dec. 17, the average rate for a 30-year fixed-rate mortgage (FRM) was 3.97%, up from 3.95% the previous week. A year ago at this time, the 30-year FRM averaged 3.80%.

The average rate for a 15-year FRM was 3.22%, up from 3.19%. A year ago at this time, the 15-year FRM averaged 3.09%.

The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was 3.03%, unchanged from the previous week. A year ago, the five-year ARM averaged 2.95%.

The average rate for a one-year Treasury-indexed ARM was 2.67%, up from 2.64%. At this time last year, the one-year ARM averaged 2.38%.

‘As was almost-universally expected, the Federal Open Market Committee (FOMC) of the Federal Reserve elected this week to raise short-term interest rates for the first time since 2006,’ says Sean Becketti, chief economist for Freddie Mac, in a release. ‘We take the Fed at its word that monetary tightening in 2016 will be gradual, and we expect only a modest increase in longer-term rates.

‘Mortgage rates will tick higher but remain at historically low levels in 2016,’ Becketti adds. ‘Home sales will remain strong, but refinance activity should cool somewhat. Novel policy approaches such as quantitative easing injected significant liquidity in the economy over the past seven years. As a result, the Fed is forced to employ some new tools, such as reverse repos, as it tightens monetary policy. We are likely to see some short-term volatility in fixed-income markets as market participants adjust to these new tools.’


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