Mortgage rates rise slightly, but a bigger increase is possible

Mortgage rates ticked up this week, but a larger rise is possible next week depending on what Congress does about tax reform and the budget.

30-Year FRM	15-Year FRM	5/1-Year ARM
Average Rates	3.94%	3.36%	3.35%
Fees & Points	0.5	0.5	0.3
Margin	N/A	N/A	2.75

The 30-year fixed-rate mortgage averaged 3.94% for the week ending Dec. 7, up from last week when it averaged 3.9%, according to Freddie Mac. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.13%.

"This week's survey reflects last week's uptick in long-term interest rates, with the 30-year fixed mortgage rate up 4 basis points. The 30-year mortgage rate has been bouncing around in a 10-basis-point range since September. While long-term rates have been relatively steady week-to-week, shorter-term interest rates have been on the rise," Len Kiefer, Freddie Mac's deputy chief economist, said in a press release.

The 15-year fixed-rate mortgage this week averaged 3.36%, up from last week when it averaged 3.3%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.36%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.35% this week with an average 0.3 point, up from last week when it averaged 3.32%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.17%.

Congress was a big influence on rates last week and it could be for this week as well.

"Mortgage rates edged higher early last week with the passage of the Senate's tax reform bill, which would imply greater federal borrowing over the next decade, and news of two new Fed members with less-known monetary policy views," Aaron Terrazas, Zillow's senior economist, said when that company released its own rate tracker on Wednesday.

"Friday's employment report is the most important piece of economic data due this week, though markets will also closely watch the final contours of the tax reform bill as negotiations get underway between the House and Senate. Rates could rise sharply if Congress fails to enact a resolution to continue funding the federal government later this week," said Terrazas.

Impact of proposed cut in taxes

Small businesses which form the back bone of the economy will definitely cheer the cut on tax rates from 35% to 20% as proposed by President Trump but the proposal to reduce the deductions to simplify tax code will definitely come as a jolt to people at least in the initial stage before the reduced complexity benefits get to be seen by the public at large.

The cut in corporate tax cut will impact the GSE's financial stability as it will affect their deferred tax assets (DTA) - and will have them go back to the central banks for liquidity. This was declared in the Q3 financial statement when news of the possible rate cuts was announced. 

The impact on the larger mortgage market is to be seen. When liquidity gets impacted, originations can be impacted as well. Anyway, we at Peoples Privo Processing are ready to process your files any time !