Now that the nomination Jerome Powell as the next chair of the Federal Reserve is official, along with the recent release of an encouraging jobs report, mortgage rates have more or less stabilized as analysts await the outcome of the Republican tax reform effort.
With the fluid state of the reforms to be included in the planned overhaul of the tax code — not to mention the uncertainty surrounding the GOP’s ability to unite the fractured groups that exist at both ends of the party’s ideological spectrum — the lack of clarity concerning the legislative efforts on tax reform will continue to exert some level of influence over mortgage rates until the matter is resolved one way or the other.
According to the most recently available information from Freddie Mac, the 30-year fixed-rate average is up by 0.33 points compared to one year ago, with the current rate checking in at 3.9 percent (compared to 3.57 percent at this point in the previous year). The 3.9 percent figure represents a .04 percent decline from the previous week (3.94 percent), while the 15-year fixed-rate experienced a similar week-to-week decline, dropping from 3.27 percent to 3.24 percent. The current rate of 3.24 percent represents an increase of .35 percent (2.88 percent) when compared to the previous year’s rate.
Even with the uncertainty surrounding the GOP’s looming tax reform efforts, most analysts expect mortgage rates to remain stable over the weeks to come. The state of the economy has not been subjected to nearly as much media scrutiny when compared to recent years, as the bulk of coverage has been devoted to foreign policy issues amid growing diplomatic tensions and the possibility of a subsequent military intervention. With less scrutiny, coverage of every minor wax and wane of the economy — which are typical and ought to be largely expected — has not caused the kind of sudden and unnecessary overreaction that so frequently exerts an undue influence over the economy at large.
Of course, the Federal Reserve has not altered its position regarding its plan to increase rates before 2017 comes to a close, and some analysts predict a clash at the onset of 2018, one in which housing prices could drop due to the expected rate increase signaled by the Fed. That being said, the week-to-week fluctuations in the mortgage rate had little effect on the overall level of mortgage rate activity: Refinancing, which made up just under half of the mortgage applications, experienced a minor decline in concert with a slight rise in home purchase applications.
As many analysts have pointed out, the minor fluctuations surrounding mortgage rates are expected to remain stable over the coming weeks thanks to the clarity provided by the strong recent jobs report as well as the confirmation of the Federal Reserve’s next chair. With tax reform representing the only lingering economic uncertainty, analysts are expressing confidence in their current projections due to the existence of just a single variable that remains unknown.