U.S Mortgage Rates Flat after a 14th Record Low

Mortgage rates held steady in the week ending 10th December. In the week prior, 30-year fixed year rates had fallen by 1 basis point to a 14^th record low of the year.

Compared to this time last year, 30-year fixed rates were down by 102 basis points.

30-year fixed rates were down by 223 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the quieter side in the 1^st half of the week. Key stats included 3^rd quarter nonfarm productivity and unit labor costs and JOLTs job openings for October.

The stats had a muted impact on yields and mortgage rates, however. The focus remained on COVID-19, vaccine news, and chatter from Capitol Hill.

Freddie Mac Rates

The weekly average rates for new mortgages as of 10^th December were quoted by Freddie Mac to be:

• 30-year fixed rates remained unchanged at 2.71% in the week. Rates were down from 3.73% a year ago. The average fee remained steady at 0.7 points.

• 15-year fixed rates remained unchanged at 2.26% in the week. Rates were down by 93 basis points from 3.19% a year ago. The average fee held steady at 0.6 points.

• 5-year fixed rates fell by 7 basis points to 2.79% in the week. Rates were down by 57 points from 3.36% a year ago. The average fee held steady at 0.3 points.

According to Freddie Mac,

• Mortgage rates remain at record lows, resisting their typical correlation to Treasury yields, which have been on the rise.
• Mortgage spreads – the difference between mortgage rates and the 10-year Treasury rate – are declining from their elevated levels earlier this year.
• While today’s mortgage rate spread is about 1.8 percentage points, there is room for a further narrowing if yields continue to rise.
• Freddie Mac is encouraged to see that the spread is almost back to normal levels.

Mortgage Bankers’ Association Rates

For the week ending 4^th December, rates were quoted to be:

• Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.00% to a survey low 2.97%. Points rose from 0.34 to 0.40 (incl. origination fee) for 80% LTV loans.
• Average interest rates for 30-year fixed to conforming loan balances decreased from 2.92% to a survey low 2.90%. Points increased from 0.31 to 0.35 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 3.19% to 3.20%. Points decreased from 0.30 to 0.28 (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, fell by 1.2% in the week ending 4^th December. In the week prior, the index had slipped by 0.6%.

The Refinance Index increased by 2% and was 89% higher than the same week a year ago. In the week prior, the index had decreased by 5%.

The refinance share of mortgage activity rose from 69.5% to 72.0%. The share had fallen from 71.1% to 69.5% in the week prior.

According to the MBA,

• Refinance activity increased last week in response to mortgage rates falling to survey lows.
• The ongoing refinance wave has continued through the fall, with activity last week up 89% from a year ago.
• The purchase market is also poised to finish 2020 on a strong note.
• Applications fell slightly last week but were around 3% higher than the 2-weeks leading up to Thanksgiving.

For the week ahead

It’s a relatively busy 1^st half of the week on the U.S economic calendar.

Key stats include industrial production and retail sales figures for November, and prelim private sector PMI numbers for December.

Expect retail sales and service sector PMI numbers to have the greatest impact on yields.

On the monetary policy front, the FED is also in action on Wednesday. Low rates for longer would support mortgage rates at current lows.

From elsewhere, economic data from China and the Eurozone will also influence.

Away from the economic calendar, however, Brexit, COVID-19 news, and chatter from Capitol Hill will remain key yield drivers.