Mortgage Rates and Home Prices Continue to Climb

December 9, 2016

As 2016 draws to an end, mortgage rates continue their upward march.  Many experts anticipate that rates will climb even higher because of recent strong economic data and the high probability of a rate increase by the Federal Reserve before the New Year.

Photo courtesy of Stuart Miles at

Photo courtesy of Stuart Miles at


On Thursday, Dec. 1st, Freddie Mac released data showing that the 30-year fixed-rate average climbed to 4.08% with an average of .5 point.  Points account for fees paid to a lender which are equal to one percent of the total loan amount.  This means that the average 30-year fixed rate has now increased more than half a percentage point in the last month—and it hasn’t been this high since July of 2015. 

Meanwhile the 15-year fixed-rate average climbed to 3.34% with an average of .5 point, up from 3.16 a year ago.  This is the highest level the 15-year fixed mortgage loan rate has been since October of 2014.  The five-year adjustable rate also increased to its highest level since January of 2014, now at 3.15% with an average of .4 point, although it was 2.99% a year ago. 

Naturally, the increase in rates has driven down mortgage applications.  Recent data from the Mortgage Brokers Association’s market composite index, which is a measure of total loan application volume, shows that total applications dropped 9.4% from the previous week.  The refinance index also dropped 16% as a result of higher rates.  Mike Fratantoni, MBA chief economist, stated, “Refinance volume, which is very sensitive to rates, dropped more than 16% in the most recent week, with refinances of government loans dropping 30% for the week…However, the mix continues to shift towards higher balance loans, as the average purchase loan size reached a new survey record.”

As recently reported, home prices have finally surpassed the record highs set a decade ago.  The latest data released by S&P Dow Jones Indices and CoreLogic, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, recorded a 5.5% annual gain in September, up from 5.1% in October.  The new price peak set by the S&P Case-Shiller CoreLogic National Index is an indicator that the housing market has officially recovered, however it depends on the individual city. 

Home prices have rebounded in New York City—for example in July, Manhattan’s median price per square foot was up 31.3% to $1,759 and the median sales price increased 13.1% from the same quarter over last year to $1,108,500, according to a Douglas Elliman report.  While other cities have finally reached new post-recession peaks, “NYC, Miami, Tampa, Phoenix and Las Vegas still remain below their all-time highs,” according to David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.

Since home prices and interest rates will most likely continue to climb, if you’re considering buying a new home, it’s financially wise to make the investment sooner rather than later.

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