US Mortgage Rates Fall for a Third Week on December Fed Pivot Bets

In the week ending December 1, mortgage rates fell for a third consecutive week. 30-year fixed mortgage rates fell by nine basis points to 6.49%.

Following the latest decline, 30-year fixed rates are up 150 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 338 basis points year-over-year.

Economic Data from the Week

On Wednesday, Fed Chair Powell sent US Treasury yields and the dollar tumbling. The Fed Chair talked about slowing the pace of interest rate hikes, supporting the rising bets of a Fed pivot.

Powell’s comments followed a mixed set of economic indicators, which continued supporting a 50-basis point December rate hike.

US consumer confidence weakened, with ADP nonfarm employment change numbers falling short of expectations. However, the JOLTs Job Openings pointe to robust labor market conditions, which limited the impact of the ADP report.

Freddie Mac Rates

The weekly average rates for new mortgages, as of December 1, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates fell by nine basis points to 6.49%. This time last year, rates stood at 3.11%.
• 15-year fixed rates declined by 15 basis points to 5.76%. Rates were up by 337 basis points from 2.39% a year ago.

According to Freddie Mac,

• The downward trend in mortgage rates continued in response to rising bets of the Fed slowing its pace of interest rate hikes.
• However, while rates declined and house prices softened, economic uncertainty affected buyer demand.

Mortgage Bankers’ Association Rates

For the week ending November 25, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances decreased from 6.67% to 6.49%. Points remained at 0.68 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA fell from 6.66% to 6.57%. Points increased from 1.01 to 1.14 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 6.30% to 6.35%. Points fell from 0.74 to 0.61 (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, decreased by 0.8% in the week ending November 25. The Index increased by 2.2% in the week prior.

The Refinance Index slid by 13% and was 86% lower than the same week one year ago. In the previous week, the Index increased by 2%.

The refinance share of mortgage activity declined from 28.4% to 26.1%. In the week prior, the refinance share increased from 27.6% to 28.4%.

According to the MBA,

• Mortgage rates declined in response to lower bond yields, with the 30-year fixed mortgage rate down 57 basis points in four weeks.
• The domestic and global economies are weakening, which should slow inflation and the Fed’s pace of rate hikes.
• While purchase activity picked up, refinance activity fell, leaving the refinance share of mortgage applications and refinance applications at their lowest levels since 2000.

For the week ahead

It is a quiet first half of the week. Factory orders and service sector PMI numbers will be in the spotlight on Monday. Following the ISM Manufacturing PMI number on Thursday, a sharp fall in the ISM Non-Manufacturing PMI would reignite fears of a US economic recession.

Weak PMI numbers would also mute the impact of Friday’s US Jobs Report on mortgage rates.

However, with the Fed going into its Blackout Period from December 3 until December 15, there will be no FOMC members to comment on Friday’s US Jobs Report and Monday’s ISM Non-Manufacturing PMI numbers.