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U.S Mortgage Rates Slide but Avoid sub-3%

Mortgage rates hit reverse ahead of the holidays, with volatility stemming from the Omicron strain weighing. In the week ending 23rd December, 30-year fixed rates fell by 7 basis point to 3.05%.

30-year fixed rates held above the 3% mark for a 6th consecutive week in spite of the decline.

Compared to this time last year, 30-year fixed rates were up by 39 basis points. 30-year fixed rates were still down by 189 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. Finalized 3rd quarter GDP and December consumer confidence figures were in focus. Upbeat numbers were not enough to offset concerns over the Omicron strain.

In the 3rd quarter, the U.S economy expanded by 2.3%, which was up from a previous estimate of 2.1%.

More significantly, consumer confidence improved at the end of the year. This was in spite of the Omicron strain, rising consumer prices, and a shift in FED guidance on interest rates.

In December, the CB Consumer Confidence Index rose from 111.9 to 115.8.

Freddie Mac Rates

The weekly average rates for new mortgages as of 23rd December were quoted by Freddie Mac to be:

  • 30-year fixed rates declined by 7 basis points to 3.05% in the week. This time last year, rates had stood at 2.66%. The average fee rose from 0.6 points to 0.7 points.
  • 15-year fixed decreased by 4 basis points to 2.30% in the week. Rates were up by 11 basis points from 2.19% a year ago. The average fee held steady at 0.7 points.
  • 5-year fixed rates slid by 8 basis points to 2.37%. Rates were down by 42 points from 2.79% a year ago. The average fee increased from 0.3 points to 0.4 points.

According to Freddie Mac,

  • The market volatility resulting from the COVID-19 Omicron variant is causing mortgage rates to decrease.
  • As the year comes to a close, the housing market is proceeding steadily.
  • However, rates are expected to increase in 2022, which will impact homebuyer demand as well as refinance activity.

Mortgage Bankers’ Association Rates

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.

According to the MBA,

  • Mortgage applications fell last week, driven by a 3% decline in purchase applications.
  • In spite of the decline, the average purchase loan increased for a 2nd consecutive week to $416,200. This was the 2nd highest level ever.
  • The elevated loan size is an indication that activity is more on the higher end of the market.
  • Home-price appreciation growth remains faster than historical averages.
  • Inventories, particularly for starter homes, continue to trail strong demand.

For the week ahead

It’s a quiet first half of the week on the U.S economic calendar. Trade data and inventories will be in focus on Wednesday, along with housing sector figures. The stats are unlikely to have a material impact on yields, however.

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