U.S Mortgage Rates Hold Steady for a 3rd Consecutive Week

Mortgage rates held steady in the 1^st week of February, after barely moving in the week prior.

In the week ending 3^rd February, 30-year fixed rates remained unchanged at 3.55%. 30-year fixed rates had slipped by 1 basis point to 3.55% in the previous week. As a result, 30-year fixed rates held above the 3% mark for an 12^th consecutive week.

Compared to this time last year, 30-year fixed rates were up by 82 basis points.

30-year fixed rates were still down by 139 basis points, however, since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a busier start to the week, with manufacturing sector PMI and ADP nonfarm employment change key stats.

The stats were skewed to the negative, suggesting that the economic recovery hit a speed bump at the turn of the year.

Freddie Mac Rates

The weekly average rates for new mortgages as of 3^rd February were quoted by Freddie Mac to be:

• 30-year fixed rates remained unchanged at 3.55% in the week. This time last year, rates had stood at 2.73%. The average fee increased from 0.7 points to 0.8 points.

• 15-year fixed fell by 3 basis point to 2.77% in the week. Rates were up by 56 basis points from 2.21% a year ago. The average fee rose from 0.6 points to 0.7 points.

• 5-year fixed rates increased by 1 basis point to 2.71%. Rates were down by 7 basis points from 2.78% a year ago. The average fee rose from 0.2 points to 0.3 points.

According to Freddie Mac,

• The economy lost some momentum in January, leaving mortgage rates flat for a 3^rd week in a row.
• This stagnation was attributed to the Omicron strain, which is likely to abate in the months ahead.
• With the economic recovery expected to continue into the spring and summer, mortgage rates are likely to resume their upward trend.
• Recent data indicates that homebuyer demand remains elevated, while supply remains low, driving prices northwards.

Mortgage Bankers’ Association Rates

For the week ending 28^th January, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances rose from 3.72% to 3.78%. Points decreased from 0.43 to 0.41 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 3.69% to 3.86%. Points decreased from 0.61 to 0.55 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 3.56% to 3.59%. Points fell from 0.38 to 0.31 (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, jumped by 12% in the week ending 28^th January, reversing a 7.1% slide from the previous week.

The Refinance Index surged by 18% and was 50% lower than the same week one year earlier. In the previous week, the index had tumbled by 13%.

The refinance share of mortgage activity increased from 55.8% to 57.3%. In the previous week, the share had decreased from 60.3% to 55.8%.

According to the MBA,

• Most mortgage rates continued to rise, with the 30-year fixed hitting its highest level since March 2020.
• Refinance applications surged in spite of the rise in rates, though the numbers were likely affected by the holidays.
• Purchase applications were on the rise but remained 7% down from a year earlier.
• The average loan size hit a new survey high $441,100, driven by low inventories and house price appreciation.

For the week ahead

It’s a particularly quiet start to the week for the U.S markets. There are no major stats due out in the 1^st half of the week to influence yields and mortgage rates. The lack of stats will leave last week’s nonfarm payrolls and central bank chatter to provide direction.

Away from the economic calendar, however, geopolitics will be an area of focus.