On December 14, Federal Reserve Chair Janet Yellen announced that the agency has raised its benchmark interest rate by 0.25%. The rate hike was highly anticipated. However, the Federal Reserve suggested that it would raise rates more aggressively in 2017, signaling its optimism about the United States economy. Meanwhile, with the recent surge in the stock market — driving the Dow Jones Industrial Average near 20,000 — investors are pulling out of the bond markets and moving into stocks in anticipation of less governmental regulation and significant economic growth under a Trump administration. This has driven down bond prices, increasing yields and also putting pressure on long-term interest rates. With the Fed’s rate hike, mortgage rates were pushed up across the board to its highest levels this year. Freddie Mac announced that, for the week ending December 15, the 30-year fixed-rate mortgage (FRM) averaged 4.16%, up from 4.13% the previous week and 3.97% the same week last year. The 15-year FRM averaged 3.37%, which is higher than last week’s rate of 3.36% and last year’s rate of 3.22%. The interest rate for the 5/1 adjustable rate mortgage also peaked at 3.19% — higher than the previous week’s rate (3.17%) and the year-over-year rate (2.67%). The higher interest rates are already having an impact in loan originations and refinancing. A report from the Kroll Bond Rating Agency predicted a 20% drop in loan origination volume in 2017 and a decrease in refinancing volumes from $263 billion this quarter to $145 billion in the first quarter in 2017. “We are starting to see a slowdown in loan originations,” Neil Garfinkel, Managing Partner, Abrams Garfinkel Margolis Bergson, LLP (AGMB) says. “If people are considering refinancing, they should do it now.” Mr. Garfinkel says he also anticipates a decline in home sale prices in the New York residential real estate market. “I believe that higher mortgage rates will result in lower housing prices. Lenders who have strong lending programs will do well in the marketplace.” Mr. Garfinkel is the Partner in Charge of AGMB’s Real Estate and Banking Practices. He concentrates his practice in the areas of commercial and residential real estate, banking and lending law. His clients include national and international banks, mortgage bankers, real estate brokers, developers, title companies and purchasers and sellers of residential and commercial real estate. He serves as Broker Counsel to the Real Estate Board of New York (REBNY) and hosts the REBNY Legal Line, a daily legal hotline provided exclusively for REBNY members. Through his affiliation and participation with REBNY and the Long Island Board of Realtors, he provides counsel on fair housing matters, commission disputes, licensing and disclosure requirements, agency issues, employment and wage laws, strategic alliances and affiliated business relationships and disciplinary actions instituted by governmental entities. He is also a member of the New York State Board of Realtors and the National Association of Realtors. In addition, Mr. Garfinkel serves as Counsel to the Empire State Mortgage Bankers Association. He is a Diamond Member of the New York Association of Mortgage Brokers and is a member of the Community Mortgage Bankers Forum, the Mortgage Bankers Association of New York and the National Association of Mortgage Brokers. For more information about the law firm, call our New York, New York office at (212) 201-1170 or our Los Angeles, California office at (310) 300-2900.

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