Week Almost Guarantees Mortgage Rates Won’t Return to Former Lows

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There’s no use trying to sugarcoat it this week: The trend is upward, not down. Predicting such things is usually a conservative game—don’t predict as much as report what’s already happened—but there doesn’t seem to be much chance of rates dipping below 4 percent again during 2017 (now, the reason why prognosticators take such a conservative approach is because as soon as they make an “obvious” prediction, some sort of dramatic event occurs and proves us wrong).

Rates rose for five of the past six days, which leaves the average lender offering 4.25 percent for a 30-year fixed rate mortgage.

A quick primer for those in the audience who note, correctly, that the average 30-year fixed rate being offered last week was also 4.25 percent. So how does that equate to rising rates for five of the past six days?

You need to understand that, more often than not, gauging the “rise” of rates is based more on the mean than the median. Essentially, if you took every 30-year fixed rate being offered right now, the mean (or average) would actually be slightly higher than 4.25 percent, because there are many more lenders offering 4.375 percent than those offering 4.125 percent. However, because reporting a number such as “4.284” percent doesn’t make sense (because no one is going to offer that rate), it makes more sense to report the median—or the literal middle number in the range of entries.

The median for almost all of 2017 has been 4.25 percent…however the mean has been sneaking up almost every week. Eventually, and almost inevitably, the median will tip over to 3.375 percent. And, based on projections from the Federal Reserve—as well as big numbers over at the DOW Jones Industrial—those numbers could get as high as 5 percent by the end 0f 2017.

If your clients are close to closing, encourage them strongly to lock in now, especially if your current offerings are at 4.25 percent or below.

“The trend is not your friend right now,” says Hugh Page of Seacoast Bank. “With stocks rallying through the 20,000 level, bonds are taking it on the chin and mortgage rates are moving higher.  No sense playing any float games in this environment so if you’re in a position to lock in your interest rate by all means I think you should do so.”