Buyers Beware: Mortgage Rates Jump Nearly 40 Basis Points

Are you in the market to buy a home? Will you need to use a mortgage loan to finance your purchase? If so, there's a recent trend you should be aware of. Nationwide, mortgage rates took a big jump last week (as reported on November 17, 2016). And this followed three consecutive weeks of increases.

According to the weekly market survey conducted by Freddie Mac, the average rate for a 30-year fixed home loan rose by nearly 40 basis points last week, compared to the week before. Thirty-year rates climbed to 3.94%. That's the highest they've been this year, since January.
Mortgage Rate Trends for November 2016

On November 17, Freddie Mac -- the government-controlled corporation that buys and sells mortgage loans -- announced that the average rate for a 30-year fixed-rate mortgage (FRM) shot up to 3.94%. That's an increase of almost 40 basis points, or 0.40%, from the previous week's average of 3.57%.

As a home buyer, you should pay close attention to these trends, because they affect your buying power. If rates keep moving along an upward trajectory, it could limit your options in terms of buying a home.

Here are the average rates from the latest market survey, in three loan categories:

* 30-year fixed-rate mortgage (FRM): 3.94%

* 15-year FRM: 3.14%

* 5/1 adjustable-rate mortgage (ARM): 3.07%

Just note that these are averages. The rate you receive on a home loan will vary based on several factors, including your credit score and the type of loan you are using.
Calling All 'Fence Sitters'

Mortgage rates have remained fairly steady through most of 2016. So this recent spike is somewhat surprising. The question is: Is this the start of a new and upward trend, or is it just a fluke? It's too soon to say. But experts are predicting a gradual rise in rates between now and this time next year.

In its latest survey, Freddie Mac's economic team stated: "If rates stick at these levels, expect a final burst of home sales and refinances [for 2016] as 'fence sitters' try to beat further increases…"

The Mortgage Bankers Association predicts that 30-year loan rates will rise above 4% during 2017. Here is their latest quarterly forecast for 30-year mortgage rates, issued in November:

    Q1 2017: 3.9%
    Q2 2017: 4.1%
    Q3 2017: 4.3%
    Q4 2017: 4.4%

If these predictions turn out to be accurate, home buyers who postpone their purchases until later in 2017 could end up paying more for a mortgage loan.

The takewaway: Current trends, as well as long-range forecasts, make a strong case for buying a home sooner rather than later.