U.S Mortgage Rates Rise on COVID-19 Vaccine Optimism

Freddie Mac Rates

The weekly average rates for new mortgages as of 12th November were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 6 basis points to 2.84% in the week. Rates were down from 3.75% from a year ago. The average fee remained steady at 0.7 points.
  • 15-year fixed rates rose by 2 basis points to 2.34% in the week. Rates were down from 3.20% a year ago. The average fee held steady at 0.6 points.
  • 5-year fixed rates jumped by 22 basis points to 3.11% in the week. Rates were down by 33 points from last year’s 3.44%. The average fee rose from 0.3 points to 0.4 points.

According to Freddie Mac,

  • Mortgage rates jumped as a result of positive news about a COVID-19 vaccine.
  • Despite the rise, mortgage rates remain about a percentage point below a year ago.
  • The low rate environment is supportive of both purchase and refinance demand.
  • Heading into late fall, the housing market continues to grow and buttress the economy.

Mortgage Bankers’ Association Rates

For the week ending 6th November, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, remained unchanged at 3.08%. Points rose from 0.26 to 0.37 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances fell from 3.01% to a survey low 2.98%. Points decreased from 0.38 to 0.35 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.18% to 3.13%. Points increased from 0.30 to 0.31 (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, slipped by 0.5% in the week ending 6th November. In the week prior, the index had increased by 3.8%.

The Refinance Index increased by 1% and was 67% higher than the same week a year ago. In the week prior, the index had risen by 6%.

The refinance share of mortgage activity rose from 68.7% to 70.0%. In the week prior, the share had increased from 66.7% to 68.7%.

According to the MBA,

  • Mortgage application activity was mixed last week, despite the 30-year fixed rate falling to an all-time low 2.98%.
  • The refinance index climbed to its highest level since August, however, supported by a 1.5% increase in conventional finances.
  • For the purchase market, the recent slump continued, with the index falling for a 6th time in seven weeks. The latest fall left the index at its lowest level since May 2020.
  • Homebuyer demand is still strong overall, and activity was up 16.5% from a year ago.
  • Inadequate housing supply is putting upward pressure on home prices, impacting affordability.
  • The trend in larger average loan application sizes and growth in loan amounts points to a continued rise in home prices, as well as the strength in the upper end of the market.

For the week ahead

It’s a busier 1st half of the week on the U.S economic calendar.

Key stats include the NY Empire State Manufacturing Index, retail sales, and industrial production figures.

Expect retail sales figures due out on Tuesday to have the greatest impact on yields.

Housing sector figures on Wednesday will also draw attention, with October building permits and housing starts in focus.

Disappointing housing sector figures will likely raise further concerns over inventories and support further increases in house prices near-term.

From elsewhere, industrial production, retail sales, and unemployment numbers from China will also influence market risk sentiment.

Away from the economic calendar, U.S politics, COVID-19 news updates, and Brexit will also provide direction.

On the Brexit front, it’s the final few days of talks ahead of Thursday’s final deadline.

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