U.S Mortgage Rates Slide to a 15th Low of the Year

Mortgage rates fell to a 15^th record low of the year, after having held steady in the week prior.

Compared to this time last year, 30-year fixed rates were down by 106 basis points.

30-year fixed rates were also down by 227 basis points since November 2018’s most recent peak of 4.94%.

The 15^th record low resulted from market uncertainty over talks on Capitol Hill, disappointing economic data, and a dovish FED.

Economic Data from the Week

Economic data was on the busier side in the 1^st half of the week.

Industrial production figures for November and December Empire State Manufacturing numbers disappointed on Tuesday.

Of greater significance, however, was another fall in retail and core retail sales in November. The continued fall in consumption was a reflection of labor market conditions.

With the COVID-19 pandemic slowing the economic recovery, service sector activity saw slower growth in December. The Services PMI fell from 58.4 to 55.3, according to prelim figures.

Following a string of disappointing labor market and inflation figures, the FED delivered the assurance of continued support. While leaving monetary policy unchanged, the FED stated that it would maintain purchasing at least $120bn worth of bonds monthly until progress is made towards maximum employment and inflation targets.

Lower for longer and question markets over the economic recovery offset the positive COVID-19 vaccine news in the week.

Freddie Mac Rates

The weekly average rates for new mortgages as of 17^th December were quoted by Freddie Mac to be:

• 30-year fixed rates fell by 4 basis points to a new low of 2.67% in the week. This time last year, rates stood at 3.73%. The average fee remained steady at 0.7 points.

• 15-year fixed rates fell by 5 basis points to 2.21% in the week. Rates were down by 98 basis points from 3.19% a year ago. The average fee held steady at 0.6 points.

• 5-year fixed rates held steady at 2.79% in the week. Rates were down by 58 points from 3.37% a year ago. The average fee held steady at 0.3 points.

According to Freddie Mac,

• The housing market continues to surge, supporting an otherwise stagnant economy that has recently lost momentum.
• Mortgage rates are at record lows pushing prospective homebuyers off the sidelines and into the market.
• Homebuyer sentiment is sanguine and purchase demand shows no real signs of waning heading into next year.

Mortgage Bankers’ Association Rates

For the week ending 11^th December:

• Average interest rates for 30-year fixed to conforming loan balances decreased from 2.90% to a new survey low of 2.85%. Points decreased from 0.35 to 0.33 (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, increased by 1.1% in the week ending 11^th December. In the previous week, the index had fallen by 1.2%.

The Refinance Index increased by 1% and was 105% higher than the same week a year ago. In the week prior, the index had increased by 2%.

The refinance share of mortgage activity rose from 72.0% to 72.7%. The share had risen from 69.5% to 72.0% in the week prior.

According to the MBA,

• U.S Treasury yields stayed low last week, in part due to uncertainty over the COVID-19 stimulus package. Concerns over a continued rise in new COVID-19 cases also pinned back yields.
• Homeowners responded to a decline in rates, with refinance activity rising for a 2^nd consecutive week.
• The ongoing strength in the housing market has carried into December.
• Applications to buy a home increased for the 4^th time in 5-weeks.

For the week ahead

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

Key stats include November inflation and personal spending figures. From the housing sector, existing and new home sales will draw interest but would unlikely impact mortgage rates, however.

Finalized 3^rd quarter GDP numbers and December consumer sentiment figures should also lack influence.

Away from the economic calendar, updates from Capitol Hill on stimulus talks and COVID-19 news updates will influence, however.