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U.S Mortgage Rates Jump on Stimulus and COVID-19 Vaccination News

Mortgage rates were on the rise for a 2nd consecutive week, with 30-year fixed rates jumping by 14 basis points to 2.79%.

Compared to this time last year, 30-year fixed rates were down by 86 basis points.

30-year fixed rates were also down by 215 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

Through the 1st half of the week, economic data from the U.S was on the lighter side. Key stats included JOLTs job openings and inflation figures.

While JOLTs job openings eased in November, the annual core rate of inflation held steady at 1.6%. The stats had a muted impact in the week, however.

From Capitol Hill, the planned rollout of a sizeable stimulus package and ongoing vaccinations supported riskier assets.

Freddie Mac Rates

The weekly average rates for new mortgages as of 14th January were quoted by Freddie Mac to be:

  • 30-year fixed rates jumped by 14 basis points to 2.79% in the week. This time last year, rates stood at 3.65%. The average fee remained steady at 0.7 points.
  • 15-year fixed rates rose by 7 basis point to 2.23% in the week. Rates were down by 86 basis points from 3.09% a year ago. The average fee rose from 0.6 points to 0.7 points.
  • 5-year fixed rates surged by 37 basis points to 3.12%. Rates were down by 27 points from 3.39% a year ago. The average fee rose from 0.3 points to 0.4 points.

According to Freddie Mac,

  • A rise in U.S Treasury yields at the start of the year pressured mortgage rates upwards in the week.
  • While rates are expected to increase modestly in 2021, they will remain inarguably low, supporting homebuyer demand and mortgage refinancing.
  • Borrowers are smart to take advantage of these low rates now and will benefit as a result.

Mortgage Bankers’ Association Rates

For the week ending 8th January, the rates were:

  • Average interest rates for 30-year fixed to conforming loan balances increased from 2.86% to 2.88%. Points decreased from 0.35 to 0.33 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA increased from 2.90% to 2.93%. Points fell from 0.33 to 0.32 (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, surged by 16.7% in the week ending 8th January. Over the 2-weeks prior, the Index had fallen by 4.2%..

The Refinance Index jumped by 20% and was 93% higher then the same week a year ago. Over the 2-weeks to 1st January, the index had fallen by 6%.

In the week ending 8th January, the refinance share of mortgage activity increased from 73.5% of total applications to 74.8%.

According to the MBA,

  • Booming refinance activity in the first full week of 2021 caused mortgage applications to surge to their highest level since March-2020.
  • The expectation of additional fiscal stimulus and the rollout of vaccines improved the economic outlook. This lead to a jump in Treasury yields that drove mortgage rates northwards.
  • Even with rising mortgage rates, refinancing did not slow at the start of the year.
  • Sustained housing demand continued to support purchase growth, with activity up nearly 10% from a year ago.

For the week ahead

It’s a particularly quiet first half of the week on the U.S economic calendar. There are no material stats due out of the U.S to provide U.S Treasuries and mortgage rates with direction.

A lack of stats will leave yields in the hands of COVID-19 news, chatter from Capitol Hill, and economic data from the week prior.

Disappointing jobless claims and retail sales figures from last week will set the tone going into the week.

On Monday, 4th quarter GDP numbers from China will also influence.

Ultimately, however, with details of the U.S stimulus package now out, COVID-19 news will remain a key driver.