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Fixed Rates Surpass Adjustable Rates and Increase Rapidly

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Fixed mortgage loan interest rates changed considerably this week while adjustable rates barely changed, according to rate reports provided by loans.org.

For the week ending Dec. 5, 2013, the 30-year fixed-rate mortgage averaged 4.32, a 14 basis point increase from 4.18 percent set last week.

The 15-year FRM averaged 3.29 percent, another large increase from 3.17 reported previously.

Adjustable rates changed less this week in comparison to fixed mortgage loan interest rates. The 5/1 adjustable-rate mortgage only increased three basis points from 2.73 to 2.76 percent.

Housing permits reached a five year high in October, according to recently released reports from the Commerce Department. New construction applications rose 6.2 percent, reaching a 1.03 million annualized rate. The numbers are the highest since June 2008, right before the housing crash. The large increase signals a strengthening housing market according to Don Frommeyer, president of the Association of Mortgage Professionals.

Another positive change is an increase in property values, which increased the most in the past seven years.

These two changes will be beneficial in aiding the economy in the coming months as the lending market shifts importance from one loan type to another. On Freddie Mac’s recent outlook report, it predicted that there will be a shift from a refinance dominated market to a purchase dominated market.

Grace Keister, an online marketing specialist for First Team Real Estate, said this would be the first time the market has been dominated by new purchases since 2000.

“Refinances have been dominating the market but economists predict home purchase loans will be taking the lead now,” she said.

Changes in mortgage loan interest rates, property values and a shift towards a purchase dominated market should all be supported by the upcoming change in Fed leadership. As Janet Yellen takes over as chairman, many experts believe the market will remain steady, if not improve.

Patrick Palzkill, a real estate broker for Beacon Rock Real Estate and Mortgage, said that Yellen will lead similarly to her predecessors, such as Alan Greenspan and Ben Bernanke, because she has a similar mindset and educational background.

“Yellen is seen as more of a dove and will likely keep rates low to help with unemployment,” he said but stipulated that she will not hesitate to increase mortgage loan interest rates if there are any visible signs of inflation.