California Mortgage News: Top Three Stories for 2018

Mortgage rates just jumped, tax deductions have shrunk, and loan limits were increased for all of the major loan programs. Those are three of the biggest California mortgage news stories you should know about, as we head into 2018.

1. Average mortgage rates have risen above 4%.

Over the last few months, the average rate for a 30-year fixed mortgage loan has been hovering below 4%. (That’s based on the weekly industry survey conducted by Freddie Mac.) But that recently changed.

The latest survey, conducted during the week of January 25, 2018, revealed that the average rate for a 30-year fixed home loan in California and nationwide jumped to 4.15%. That was an increase of 11 basis points (or 0.11%) over the previous week’s average.

According to a January 25 news release:

“The 10-year Treasury yield reached its highest point since 2014 reflecting expectations of broad-based economic growth. Mortgage rates, in turn, followed the surge in Treasury yields. The 30-year fixed rate mortgage jumped 11 basis points to 4.15 percent, its highest level since March of last year.”

This coincides with mortgage rate forecasts offered by economists over the last few months. Analysts from both Freddie Mac and the Mortgage Bankers Association (MBA) previously predicted that home loan rates would gradually rise during 2018.

This is one of the California mortgage news stories to watch closely, particularly if you are in the market to purchase or refinance a home. It might be wise to take out that new loan sooner rather than later, to avoid potentially higher rates down the road.

Note: Mortgage interest rates vary due to a number of variables, including the borrower’s credit history and type of loan being used. Please contact us if you would like to receive a quote tailored to your specific situation.

2. Mortgage interest deduction limit was reduced for 2018.

You probably already know that Congress passed a tax reform package. After all, it dominated the news cycle for weeks. But what you might not know is that the Tax Cuts and Jobs Act will reduce the size of the mortgage interest deduction that California homeowners are allowed to take in 2018.

We blogged about this topic before, so you can read this article for details. Here’s the short version. Before this change, homeowners in California were able to deduct the interest paid toward mortgage loans up to $1 million. But starting in 2018, that deduction limit was reduced to $750,000.

In many states, where average home prices fall well below $750,000, most homeowners will not be affected by this change. But in many California housing markets, where the average home costs much more, a lot of homeowners could take a hit going forward.

3. FHA, VA and conventional loan limits went up in 2018.

Mortgage rates are up, and tax deductions are down. That’s the bad news. The good news is that mortgage borrowers in California will have higher loan limits available to them in 2018. This is the result of rising home values.

At the end of last year, federal housing officials announced that they would raise the official loan limits for FHA, VA, and conventional / conforming mortgage loans. This means borrowers have more financing range without having to cross over into “jumbo” mortgage territory.

• Conforming and VA loan limits for California will range from $453,100 up to $679,650.
• The revised FHA limits for 2018 will range from $294,515 up to $679,650.

The lower limits apply to most counties across the state, while the more expensive areas like the Bay Area and Los Angeles have higher caps of up to $679,650. It’s possible to borrow more than these amounts, as long as your income supports it. This is referred to as a jumbo loan.

Related: Mortgage requirements for borrowers

So those are some of the top California mortgage news stories that home buyers and homeowners should know about in 2018.