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U.S Mortgage Rates Inch Up ahead of the Holidays

Mortgage rates were on the rise after 3 weeks of hovering. The rise came off the back of positive stats and a shift in FED monetary policy guidance.

In the week ending 16th December, 30-year fixed rates rose by 2 basis point to 3.12%.

Compared to this time last year, 30-year fixed rates were up by 45 basis points.

30-year fixed rates were still down by 182 basis points, however, since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a busy first half of the week on the U.S economic data front, with wholesale inflation and retail sales in focus.

A further pickup in wholesale inflationary pressures and softer than expected consumer spending tested support for riskier assets.

In November, the U.S core annual rate of wholesale inflation accelerated from 7.0% to 7.7%.

Core retail sales rose by just 0.3%, however, after having risen by 1.8% in October. Economists had forecast a 0.9% rise.

Ultimately, however, it was the FOMC monetary policy decision and economic projections that moved the markets.

In line with expectations, the FED announced a faster end to the asset purchasing program. To combat inflation, the FED also projected 3 rate hikes for next year. This was up from the September projections.

Freddie Mac Rates

The weekly average rates for new mortgages as of 16th December were quoted by Freddie Mac to be:

  • 30-year fixed rates rose by 2 basis points to 3.12% in the week. This time last year, rates had stood at 2.67%. The average fee fell from 0.7 points to 0.6 points.
  • 15-year fixed decreased by 4 basis points to 2.34% in the week. Rates were up by 13 basis points from 2.21% a year ago. The average fee held steady at 0.7 points.
  • 5-year fixed rates remained unchanged at 2.45%. Rates were down by 34 points from 2.79% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • Mortgage rates inched up as a result of economic improvement and a shift in monetary policy guidance.
  • While house price growth is slowing, prices remain high due to solid housing demand and low supply.
  • We expect rates to continue to increase into 2022, which may leave some potential homebuyers, with less room in their budgets, on the sideline.

Mortgage Bankers’ Association Rates

For the week ending 10th December, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 3.30%. Points held steady at 0.39 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA rose from 3.35% to 3.37%. Points increased from 0.32 to 0.34 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.33% to 3.32%. Points remained unchanged at 0.30 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, decreased by 4.0% in the week ending 10th December. The inde had increased by 2.0% in the week prior.

The Refinance Index fell by 6% from the previous week and was 41% lower than the same week one year ago. In the previous week, the index had increased by 9%. The refinance share of mortgage activity decreased from 63.9% to 63.3%. The share had increased from 59.4% to 63.9% in the previous week.

According to the MBA,

  • Applications to refinance fell over the week, despite the 30-year fixed rate remaining at 3.30%.
  • With rates more than 40 basis points higher than last year, applications were down 41% on an annual basis.
  • Fewer homeowners have a strong incentive to refinance at current rates.
  • Purchase activity increased slightly.
  • House demand remains strong as the year comes to an end amidst tight inventory and steep home-price growth.

For the week ahead

It’s a quieter first half of the week on the U.S economic calendar.

Economic data from the U.S is limited to finalized 3rd quarter GDP numbers on Wednesday. Barring marked revisions to the GDP numbers, we don’t expect the numbers to affect rates.

Away from the economic calendar, Omicron news updates will continue to be an area of interest, however.