Stressed Over Higher Interest Rates?
January 5, 2017 | Lawrence Yun, PhD., Chief Economist and Senior Vice President
Mortgage rates have risen since the election of Donald Trump, from 3.5% to the recent 4.2%. Bond investors are perceiving an economic stimulus package to uplift the economy. More business activity, greater commerce, and faster job growth are certainly good news, which thereby also no longer justifies the ultra-low interest rate environment of the past decade. Some Wall Street players could be betting up the bond yields not because of stimulus but for negative factors of a much higher government budget deficit arising out of big tax cuts and increased government spending. Whether from good improved economic prospects or bad budget deficit projections, the rates have gone up and will likely continue to do so over the next two years, spanning the period when the impacts of the stimulus will have been fully felt.
So in the first week of 2017, the borrowing rate on a 30-year fixed rate mortgage averaged 4.2%. Taking a look back, let’s recall how high rates were in the distant past. In the 1970s, they averaged 8.9%; in the 1980s, 12.7%; in the 1990s, 8.1%; and in the first decade of the new century they came in at 6.3%. The in-and-around 4% rate is only a recent phenomenon from the year 2011 to today. Nonetheless, many consumers with a short-term memory, especially among the young, have often witnessed sub-4% rates and the latest rising rates feel financially discomforting and discouraging.
Read, NAR Chief Economist, Lawrence Yun’s full Forbes article here.