Mortgage rates rise on promise of tax reform


A promised tax reform plan propelled mortgage rates higher this past week.

The increase ended a three-week streak of declining mortgage rates. It looked like mortgages were holding steady until late two weeks ago. Then, Apr. 21, President Donald Trump announced that he would introduce a tax reform plan soon. That announcement sent mortgage rates higher. Borrowers who managed to apply for a mortgage before the end of last week got lucky, as they locked in slightly lower rates.

A 'yuge' tax cut?

Investors were excited by the prospect of what Trump promised would be "maybe the biggest tax cut we've ever had." That stoked a stock market rally, accompanied by an increase in bond yields. Mortgage rates followed bond yields upward. Even though they rose, mortgage rates are near historical lows, making this a good time to get a mortgage.

The Trump administration's tax reform plan called for a reduction in income tax rates and a higher standard deduction. If enacted, fewer homeowners would take advantage of the mortgage interest tax deduction. They would take the higher standard deduction instead.

More buyers than houses

Higher rates didn't stop people from applying for mortgages. Applications for home loans increased 2.7 percent from the previous week, according to the Mortgage Bankers Association.

If there's a problem, it's that there aren't enough houses to go around.

Homebuyers make offers, but they're outbid. Mortgage executive Brian Koss uses a baseball metaphor to soothe these frustrated buyers.

"I'm telling people to stay at the plate, keep swinging - you'll hit something eventually," said Koss, executive vice president of Mortgage Network, in Danvers.

New home sales were up strongly in March, and prices rose, too. Joel Naroff, president of Naroff Economic Advisors, says we're not in a housing bubble, but the shortage of homes for sale, "will likely lead to even faster price increases going forward." Rising home prices encourage people to get mortgages sooner rather than later.

What mortgage rates did

The benchmark 30-year fixed-rate mortgage rose last week to 4.19 percent from 4.16 percent, according to Bankrate's weekly survey of large lenders. A year ago, it was 3.83 percent. Four weeks ago, the rate was 4.30 percent.

The 30-year fixed mortgages in the latest weekly survey had an average total of 0.26 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.92 percent. This week's rate is 0.27 percentage points higher than the 52-week average.

The 15-year fixed-rate mortgage rose to 3.43 percent from 3.35 percent.

The 5/1 adjustable-rate mortgage rose to 3.48 percent from 3.42 percent.

The 30-year fixed-rate jumbo mortgage rose to 4.14 percent from 4.07 percent.

At the current 30-year fixed rate, you'll pay $488.43 for every $100,000 you borrow, up from $486.69 seven days earlier.

At the current 15-year fixed rate, you'll pay $711.45 for every $100,000 you borrow, up from $707.54.

At the current 5/1 ARM rate, you'll pay $447.93 for every $100,000 you borrow, up from $444.59.