Homebuyers are rushing into the housing market, thanks in large part to Donald Trump.
The number of mortgage applications for home purchases jumped 19 percent last week, following a 6 percent decline the previous week. Purchase applications for the week were up 11 percent year over year, according to the Mortgage Bankers Association.
Interest rates have surged since Trump’s victory as investors shift money from bonds to stocks in anticipation of the president-elect’s stimulative fiscal policies. “Mortgage rates have continued to move higher in the post-election period,” Michael Fratantoni, chief economist at the MBA, said in a statement, “with the 30-year mortgage rate reaching its highest weekly average since the beginning of 2016.”
Bankrate said Wednesday that the average rate on a 30-year fixed mortgage — the most common home loan for buyers — hit 4.10 percent this week, the highest level since the first week of January. While rates have increased four straight weeks and seven out of the last eight weeks, Trump’s election has given rates an extra boost. The yield on the 10-year Treasury — which fixed-rate mortgages track — was 1.862 percent on Election Day. The very next day, the yield increased to 2.072 percent. It’s currently hovering around 2.411 percent.
Those rising rates are responsible for the mortgage frenzy, Fratantoni said, as homebuyers jump into the market or risk losing purchasing power.
“The increase in purchase activity was driven by borrowers seeking larger loans and that drove up the average loan amount on home purchase applications to $310,000, the highest in the survey, which dates back to 1990,” Fratantoni added.
Adding to interest rate pressure is the expectation that an increase in the federal funds rate, a benchmark for business and consumer loans, is in the offing. Last week, Federal Reserve Chair Janet Yellen said to Congress that hike could be appropriate “relatively soon.” The central bank group that sets the rate meets again in mid-December, when the increase is expected to occur.