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U.S Mortgage Rates Rise as Omicron Fears Abate

Mortgage rates were back on the rise in the final week of 2021. News of the Omicron strain being milder and fewer reported hospital cases supported riskier assets in the week.

As at 30th December, 30-year fixed rates increased by 6 basis points to 3.11%. 30-year fixed rates had fallen by 7 basis points in the week prior. As a result, 30-year fixed rates held above the 3% mark for a 7th consecutive week.

Compared to this time last year, 30-year fixed rates were up by 44 basis points.

30-year fixed rates were still down by 183 basis points, however, since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a quiet first half of the week on the U.S economic data front. Economic data was limited to trade and inventory data and housing sector numbers. The stats had a muted impact on yields, however.

Freddie Mac Rates

The weekly average rates for new mortgages as of 30th December were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 6 basis points to 3.11% in the week. This time last year, rates had stood at 2.67%. The average fee remained unchanged at 0.7 points.
  • 15-year fixed rose by 3 basis points to 2.33% in the week. Rates were up by 16 basis points from 2.17% a year ago. The average fee held steady at 0.7 points.
  • 5-year fixed rates increased by 4 basis points to 2.41%. Rates were down by 30 basis points from 2.71% a year ago. The average fee increased from 0.4 points to 0.5 points.

According to Freddie Mac,

  • Mortgage rates have effectively been moving sideways despite the increase in new COVID cases.
  • This is because incoming data suggests that the economy remains on firm ground, particularly cyclical industries like manufacturing and housing.
  • Moreover, low interest rates and high asset valuations continue to drive consumer spending.
  • While we do expect rates to rise, the push of the first-time homebuyer demographic that’s been propelling the purchase market will continue in 2022 and beyond.

Mortgage Bankers’ Association Rates

MBA’s office is closed and will reopen on Monday 3rd, 2022. The MBA will therefore release its rates for 24th and 31st December on 5th January.

For the week ending 17th December, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances fell from 3.30% to 3.27%. Points increased from 0.39 to 0.41 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA fell from 3.37% to 3.34%. Points increased from 0.34 to 0.36 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.32% to 3.31%. Points fell from 0.30 to 0.27 (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 0.6% in the week ending 17th December. The Index had fallen by 4.0% in the week prior.

The Refinance Index rose by 2% from the previous week and was 42% lower than the same week one year ago. In the previous week, the Index had fallen by 6%. The refinance share of mortgage activity increased from 63.3% to 65.2%. The share had decreased from 63.9% to 63.3% in the previous week.

For the week ahead

It’s a busy first half of the week on the economic data front. Key stats include private sector PMIs, JOLT’s job openings, and ADP nonfarm employment change figures.

On Wednesday, the FOMC meeting minutes will also garner plenty of attention.

From elsewhere, private sector PMIs from China and the Eurozone will also influence market risk sentiment in the week.

Away from the economic calendar, expect COVID-19 news updates to remain a key driver, however.