U.S Mortgage Rates Hold Steady after the Recent Jump

Mortgage rates were mixed in the final week of January.

In the week ending 27^th January, 30-year fixed rates slipped by 1 basis point to 3.55%. 30-year fixed rates had risen by 11 basis points in the week prior. As a result, 30-year fixed rates held above the 3% mark for an 11^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

Early in the week, economic data took a back seat, in spite of weak private sector PMI and consumer sentiment figures.

On Wednesday, the FOMC rate statement and press conference was the main event. A more hawkish than anticipated FED Chair, who failed to downplay monthly rate hikes, spooked the markets.

Freddie Mac Rates

The weekly average rates for new mortgages as of 27^th January were quoted by Freddie Mac to be:

• 30-year fixed rates fell by 1 basis point to 3.55% in the week. This time last year, rates had stood at 2.73%. The average fee remained unchanged at 0.7 points.

• 15-year fixed rose by 1 basis point to 2.80% in the week. Rates were up by 60 basis points from 2.20% a year ago. The average fee held steady at 0.6 points.

• 5-year fixed rates increased by 10 basis points to 2.70%. Rates were down by 10 basis points from 2.80% a year ago. The average fee fell from 0.3 points to 0.2 points.

According to Freddie Mac,

• Recent rate increases have yet to significantly impact purchase demand.
• In the past, potential homebuyers who are on the fence tend to enter the market at the start of a rate increase cycle.
• Rates are likely to continue to rise but at a more gradual pace.
• As a result, current homebuyers could continue to benefit from refinancing.

Mortgage Bankers’ Association Rates

For the week ending 21^st January, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances rose from 3.64% to 3.72%. Points decreased from 0.45 to 0.43 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 3.64% to 3.69%. Points increased from 0.44 to 0.61 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 3.54% to 3.56%. Points fell from 0.47 to 0.38 (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, slid by 7.1% in the week ending 21^st January. The Index had increased by 2.3% in the week prior.

The Refinance Index slid by 13% and was 53% lower than the same week one year earlier. In the previous week, the Index had fallen by 3%.

The refinance share of mortgage activity decreased from 60.3% to 55.8%. In the previous week, the share had declined from 64.1% to 60.3%.

According to the MBA,

• 30-year fixed rates increased for a 5^th consecutive week to its highest level since March 2020.
• Borrower demand for refinances has fallen as a result, with applications down for a 4^th week in a row.
• The average purchase loan size hit a new record high $433,500.

For the week ahead

It’s a busy start to the week for the U.S markets. ISM Manufacturing PMI and JOLT’s job openings will be in focus on Tuesday. On Wednesday, ADP nonfarm employment change figure will be the key stat of the week, however.

On the monetary policy front, expect any FOMC member chatter to also influence. Away from the economic calendar, chatter from the U.S and Russia will also be an area of focus.