US Mortgage Rates Fall for a Fourth Week on Recession Jitters

In the week ending December 8, mortgage rates fell for the fourth consecutive week. 30-year fixed mortgage rates fell by 16 basis points to 6.33%.

Following the latest decline, 30-year fixed rates are up 134 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 323 basis points year-over-year.

Economic Data from the Week

It was a relatively quiet week, allowing the markets to digest the previous week’s US Jobs Report and inflation numbers.

Despite a solid Jobs Report, increasing bets of a December Fed pivot led mortgage rates lower, with Fed Chair Powell’s talk about slowing the pace of interest rate hikes resonating.

Investor concerns over the economic outlook also weighed, with a contraction in the US manufacturing sector catching the markets by surprise. In November, the ISM Manufacturing PMI fell from 50.2 to 49.0, the first contraction since June 2020.

However, a pickup in service sector activity eased the market angst, with the ISM Non-Manufacturing PMI rising from 54.4 to 56.5. The pickup was not enough to fuel bets of another 75-basis point rate hike on Wednesday.

Freddie Mac Rates

The weekly average rates for new mortgages, as of December 8, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates fell by 16 basis points to 6.33%. This time last year, rates stood at 3.10%.
• 15-year fixed rates declined by nine basis points to 5.67%. Rates were up by 329 basis points from 2.38% a year ago.

According to Freddie Mac,

• Mortgage rates continued to decline as investor jitters over the economic outlook overshadowed the latest US Jobs Report.
• Over the last four weeks, mortgage rates have tumbled by 75 basis points, the most marked fall since 2008.
• Despite the decline, homebuyer sentiment remains low. Purchase demand showed little reaction to the decline in rates.

Mortgage Bankers’ Association Rates

For the week ending December 2, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances decreased from 6.49% to 6.41%. Points fell from 0.68 to 0.63 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA fell from 6.57% to 6.39%. Points decreased from 1.14 to 0.93 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 6.35% to 6.08%. Points fell from 0.61 to 0.50 (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, declined by 1.9% in the week ending December 2. The Index decreased by 0.8% in the week prior.

The Refinance Index increased by 5% and was 86% lower than the same week one year ago. In the previous week, the Index slid by 13%

The refinance share of mortgage activity increased from 26.1% to 28.7%. In the week prior, the refinance share declined from 28.4% to 26.1%.

According to the MBA,

• Mortgage applications fell by 2% compared to the Thanksgiving holiday numbers despite mortgage rates declining.
• Compared with one month ago, the 30-year fixed rate was 73 points lower. However, rates were still more than three percentage points higher than in December 2021.
• Purchase activity weakened, with the average loan size falling to its lowest level since January 2021, reflecting the cooling house-price environment.

For the week ahead

It is a big week ahead for the global financial markets. On Tuesday, the US CPI report will draw interest ahead of the FOMC interest rate decision and FOMC economic projections on Wednesday.

While a Fed pivot would support the current downward trend in mortgage rates, dovish economic projections could further impact home buyer demand and house prices.

However, an unexpected pickup in US inflation could force the Fed to deliver another 75-basis point interest rate hike to reverse the recent pullback in mortgage rates.