30 Year Mortgage Rates at 4.16 Percent – Still Low, Historically Speaking…

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The relentless rise in mortgage rates continues as 30 year mortgage rates hit another new high for 2016. Average 30 year mortgage rates increased to 4.16 percent this week, up 11 basis points from last week's average rate.

For the first three quarters of 2016, average 30 year mortgage rates hovered around 3.50 percent, which is just above the historical low of 3.31 percent set in November 2012. During that time, you could find lenders quoting 30 year mortgage rates with points below the historical low and as low as 3.00 percent.

The lowest 30 year mortgage rates today in the rate database are still below the current average of 4.16 percent. The best 30 year mortgage refinance rate available right now is at 3.75 percent with 0.50 mortgage points.

When you apply for a mortgage, you can get a lower mortgage rate by paying points up front. 1 mortgage point is equal to 1 percent of the loan amount. For example, a $300,000 loan with 1 point would require you to pay $3,000 upfront at closing. You have to decide whether or not paying points makes financial sense for you.

The outlook for mortgage rates in 2017 and the coming years is unfortunately higher. The driving forces behind higher mortgage rates are a stronger economy and the Federal Reserve increasing interest rates. A higher fed funds rate will force U.S. Treasury yields higher which in turn will force mortgage rates higher.

If you're interested in reading more about the correlation between Treasury yields and mortgage rates, Zacks did a good post on the subject at How Treasury Yields Affect Mortgage Interest Rates.

The Mortgage Bankers Association is forecasting average 30 year mortgage rates will hit 4.40 percent by the second quarter of 2017. Looking out to the end of 2018, the MBA is forecasting average 30 year mortgage rates to hit 4.90 percent. The last time average 30 year mortgage rates were that high was in early 2011.

Historically speaking, 30 year mortgage rates in the 4.00 percent to 5.00 percent range is still rather low. For most of the 2000s, before the financial crisis, average 30 year rates were in the 6.00 percent to 7.00 percent range. 6.00 percent to 7.00 percent also is still low historically speaking.

Ready for a shocker? In the early 1980s, a period of double digit inflation, average 30 year rates were also in the double digits. The absolute all-time high, as long as rates have been tracked, for 30 year mortgage rates was 18.53 percent set on October 13, 1981.

You can view average 30 year mortgage rates on a monthly basis since 1971 at 30 Year Fixed Mortgage Rates Since 1971.






 
Author: Brian McKay
January 1st, 2017