Published in: CUNA Councils
When the Federal Reserve announced a rate hike in March, the increase marked the latest significant change for financial markets. Following a severely flattened yield curve at the end of 2017, swap and treasury securities were sold off in anticipation of the expected rate hike and predictions of two or three more in 2018. In early January, the 2/10-year treasury spread rebounded to 61 bps, after a decade-long low of 50 bps. As of March 12, 2- and 10-year yields were 2.26% and 2.87%, respectively. The economic outlook remains primarily positive as higher interest rates and steepening yield curves often signal increased growth and expectations of inflation.
Mortgage rates were propelled upward by the increase in long-end yields. The national average offering rate of a 30-year fixed-rate mortgage was 4.08% at the end of December. On March 9, it had increased to 4.41%. Yet, even with the higher rates, credit unions experienced the strongest year in their history in terms of mortgage volume. More than $174 billion in first mortgages were originated in 2017, following the previous record set in 2016 of $172 billion.