Mortgage rates keep rising, hit highest mark of 2016

Mortgage rates went up for the eighth time in nine weeks. And in that other week? They stayed the same.

Welcome to the new reality of mortgage rates. The 30-year, fixed-rate mortgage is at 4.13 percent, the highest of 2016, and it appears ready to hang out above 4 percent for a long while. Mortgages had been rising gradually for more than a month before the presidential election. After the election, they zoomed upward for a couple of weeks.

Mortgage rates this week

The benchmark 30-year fixed-rate mortgage rose this week from 4.1 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 4.01 percent. Four weeks ago, the rate was 3.69 percent.

The last time it was higher was Dec. 30, when it averaged 4.15 percent. With one exception, the 30-year fixed has gone up every week since Bankrate’s Sept. 28 survey. It averaged 3.54 percent that week. Since then, it has gone up more than half a percentage point. The 30-year fixed was unchanged the week of Oct. 26.

Over the past 52 weeks, the 30-year fixed has averaged 3.78 percent. This week’s rate is 0.35 percentage points higher than the 52-week average. The 30-year fixed mortgages in this week’s survey had an average total of 0.23 discount and origination points.

The benchmark 15-year fixed-rate mortgage rose to 3.39 percent from 3.33 percent.

The benchmark 5/1 adjustable-rate mortgage rose to 3.48 percent from 3.44 percent.

The benchmark 30-year fixed-rate jumbo mortgage rose to 4.09 percent from 4.08 percent.

At the current 30-year fixed rate, you’ll pay $484.94 for every $100,000 you borrow, up from $483.20 last week. At the current 15-year fixed rate, you’ll pay $709.49 for every $100,000 you borrow, up from $706.56 last week. At the current 5/1 ARM rate, you’ll pay $447.93 for every $100,000 you borrow, up from $445.70 last week.

Economists say part of this rate increase comes from a belief that the Republican-controlled Congress will be more free-spending with a Republican in the White House. According to orthodox economic theory, bigger budget deficits cause interest rates to move higher. If federal, state and local governments hire more people — to repair roads and bridges, for example — that could prove inflationary, too, and push interest rates higher.

And in the past few weeks, the odds of a Federal Reserve rate increase have gone up, too. Before the election, a Fed rate hike on Dec. 14 was considered probable. Now it’s considered a certainty. When the central bank’s monetary policy committee raises the federal funds rate, most interest rates will follow. Most, but not all.

How the Fed affects mortgages

Interest rates on credit cards and home equity lines of credit will go up soon after the Fed announces its rate increase. Auto loan rates probably will rise. Yields paid to savers on certificates of deposit will rise eventually, in their leisurely way.

The exception is mortgage rates, which tend to rise before the Fed boosts the federal funds rate.

“Fixed-rate loans probably have this rate hike priced in already,” says Michael Madowitz, economist for the Center for American Progress. As mortgage rates have gone up in the past few weeks, at least some of the rise can be attributed to anticipation of a Fed rate hike.

Even with these higher mortgage rates, homeowners still are refinancing their home loans. About 55 percent of mortgage applications last week were from refinancers, according to the Mortgage Bankers Association. That was the lowest share of refinances since June, though, a month when the 30-year fixed averaged 3.72 percent.