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While the stock and bond markets have been on a frantic run, mortgage rates have been pretty quiet over the past few weeks.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed rate average remained unchanged at 3.55% with an average of 0.8 points. (A point is a commission paid to a lender equal to 1% of the loan amount. It is added to the interest rate.) It was 2.73% a year ago.
Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders across the country to arrive at weekly national averages. The survey is based on mortgages on the purchase of a home. Refinance rates may be different. It uses rates for high quality borrowers with strong credit scores and large down payments. Due to criteria, these rates are not available to all borrowers.
The average of fixed rates over 15 years fell to 2.77% with an average of 0.7 points. It was 2.8% a week ago and 2.21% a year ago. The average of the revisable rates over five years amounted to 2.71% with an average of 0.3 point. It was 2.7% a week ago and 2.78% a year ago.
“The economy lost some momentum in January, leaving mortgage rates unchanged from last week and relatively stable for the third week in a row,” Sam Khater, chief economist at Freddie Mac, said in a statement. . “This stagnation reflects the economic impact of the Omicron variant of COVID-19, which we believe will subside in the coming months. As the economic recovery continues through the spring and summer, mortgage rates should resume their upward trajectory.
Danielle Hale, chief economist at Realtor.com, warned that borrowers shouldn’t be put to sleep by the stable rates over the past few weeks.
“The apparent stability in weekly rates corresponds with larger daily swings in mortgage rates and other long-term rates, so homebuyers should be prepared for a little less calm than the weekly data suggests,” Hale said.
It may be hard to remember, but just over three years ago, the 30-year fixed rate was walking towards 5%. In November 2018, it reached 4.94%. Then the pandemic hit and sent mortgage rates to record lows. Now they are being pushed higher by inflation and moves by the Federal Reserve.
The Federal Reserve indicated last month that it would raise the federal funds rate in March. The first increase in the benchmark rate in three years will likely lead to higher mortgage rates. Although the Fed does not set mortgage rates, its decisions often influence them.
To stimulate the economy, the Fed has kept the federal funds rate near zero since the start of the pandemic. It bought Treasuries and mortgage-backed securities, which put downward pressure on rates. But these measures seem to be coming to an end. Fed Chairman Jerome Powell has signaled that the central bank will raise rates, end its bond purchases next month and reduce its balance sheet holdings over time. It remains to be seen how these measures will affect mortgage rates.
“The one thing I’ve learned from following rates and the Fed all these years is that the market is always ahead of the Fed, and they factor in upcoming Fed changes before the Fed does. make a move or even announce,” Mitch said. Ohlbaum, mortgage banker at Macoy Capital Partners.
But it’s not just the Fed that has influence over mortgage rates, although admittedly its influence has been outsized recently. World events and economic data can also impact their trajectory. Bankrate.com, which publishes a weekly index of mortgage rate trends, found that more than half of surveyed experts expect rates to fall over the coming week.
“Mortgage investors continue to digest the Fed’s policy shift,” said Les Parker, managing director of Transformational Mortgage Solutions. “Geopolitical issues and confusion over employment data are helping to lower short-term rates.”
Meanwhile, borrowers rushing to take advantage of what is likely the last of the low rates sent mortgage applications skyrocketing last week. The composite market index – a measure of the total volume of loan applications – rose 12% from the previous week, according to data from the Mortgage Bankers Association. The rollover index climbed 18%, while the buy index rose 4%. For the third week in a row, the average purchase loan amount reached a new high. It was $441,100 last week. The refinancing portion of the mortgage business accounted for 57.3% of applications.
“Owners are refinancing before rates climb even higher,” said MBA President and CEO Bob Broeksmit. “The buying market also ended January on a positive note as a strong labor market and rising wages continue to drive interest in buying a home.”
