US Mortgage Rates Fall for a Fifth Week Running on Softer Inflation

In the week ending December 15, mortgage rates fell for the fifth consecutive week. 30-year fixed mortgage rates fell by two basis points to 6.31.

Following the latest decline, 30-year fixed rates are up 132 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 319 basis points year-over-year.

Economic Data from the Week

US inflation figures drew interest on Tuesday. Softer inflation numbers for November supported Fed Chair Powell’s pre-Fed blackout period speech, talking about slowing the pace of interest rate hikes.

In November, the US annual inflation rate softened from 7.7% to 7.1%, with consumer prices rising by just 0.1% in the month. While the markets were hoping for sub-7%, the softer numbers were good enough in the lead-up to the Fed interest rate decision and economic projections on Wednesday.

Freddie Mac Rates

The weekly average rates for new mortgages, as of December 15, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates slipped by two basis points to 6.31%. This time last year, rates stood at 3.12%.
• 15-year fixed rates fell by 13 basis points to 5.54%. Rates were up by 320 basis points from 2.34% a year ago.

According to Freddie Mac,

• Mortgage rates continued to decline, supported by softer inflation and a modest shift in the Fed’s monetary policy.
• The recent downtrend in mortgage rates has steadied purchase demand.
• However, despite the pullback in rates, demand remains weak because of affordability issues.

Mortgage Bankers’ Association Rates

For the week ending December 9, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances increased from 6.41% to 6.42%. Points rose from 0.63 to 0.64 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 6.39% to 6.40%. Points increased from 0.93 to 1.03 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 6.08% to 6.14%. Points fell from 0.50 to 0.42 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, increased by 3.2% in the week ending December 9. The Index declined by 1.9% in the week prior.

The Refinance Index increased by 3% and was 85% lower than the same week one year ago. In the previous week, the Index increased by 5%.

The refinance share of mortgage activity increased from 28.7% to 29.4%. In the week prior, the refinance share increased from 26.1% to 28.7%.

According to the MBA,

• Mortgage rates rose modestly after a month of declines as the markets reacted to mixed inflation figures and the Fed policy intentions.
• Applications increased, supported by a pickup in purchase and refinance activity.
• Nonetheless, rates were still more than three percentage points higher than a year ago, leaving purchase and refinance applications well below last year’s levels.

For the week ahead

It is a quiet first half of the week. Consumer confidence figures for December will draw interest on Wednesday. However, barring a sharp pickup in consumer confidence, the numbers are unlikely to push mortgage rates higher.

Following last week’s hawkish Fed rate hike, the markets will need to grapple with the ever-increasing threat of a US recession and a hawkish Fed.

With stats on the lighter side, FOMC member chatter will need monitoring.