U.S Mortgage Rates Hit the Highest Level Since May 2020

U.S Mortgage Rates Hit the Highest Level Since May 2020
Written by Publishing Team

Mortgage rates rose again in the first week of 2022.

In the week ending 6y In January, the 30-year fixed rate rose 11 basis points to 3.22%. 30-year fixed rates rose 6 basis points in the previous week. As a result, the 30-year fixed interest rate has held above the 3% 8-year marky consecutive week.

Compared to this time last year, the 30-year constant prices are up 55 basis points.

30-year flat rates are still down 172 basis points, however, since the last peak in November 2018 at 4.94%.

Economic data of the week

The first half of the week has been a relatively busy US economic calendar. The main statistics included the ISM manufacturing PMI and the private sector PMIs in the Markit survey. On the labor market front, JOLT job vacancies and ADP non-farm job openings also attracted attention.

The stats skewed to negative, with the private sector seeing slower growth in December. Despite the drop in the PMIs, the numbers were not weak enough to raise any red flags.

JOLT’s November job prospects were also disappointing ahead of Wednesday’s ADP Nonfarm Employment Change numbers, which impressed.

In December, nonfarm payrolls jumped 800,000 according to the ADP. Economists had expected a more modest rise of 400,000.

While the stats attracted a lot of attention, it was the FOMC minutes that drove yields north. It was a tighter-than-expected set of minutes that indicated a more aggressive removal of policy support pushed mortgage rates north.

Freddy Mac prices

Average weekly rates for new mortgages as of 6y January quotes by Freddy Mac To be:

  • The 30-year fixed rate rose 11 basis points to 3.22% for the week. At this time last year, rates were 2.67%. The average fee remained unchanged at 0.7 points.
  • The 15-year constant rose 10 basis points to 2.43% for the week. Rates are up 26 basis points from 2.17% a year ago. The average fee decreased from 0.7 points to 0.6 points.
  • The 5-year fixed rate was left unchanged at 2.41%. Prices are down 30 basis points from 2.71% a year ago. The average fee remained unchanged at 0.5 points.

According to Freddy Mac,

  • Mortgage rates rose during the first week of 2022 to the highest level since May 2020 and increased more than half a percent since January 2021.
  • With rising inflation, promising economic growth and a tight labor market, we expect rates to continue rising.
  • The impact of higher rates on purchase demand has so far been modest given the current growth of first-time homebuyers.

Mortgage Bankers Association rates

For the week ending 31St December, the rates they were:

  • The average 30-year fixed interest rate with matching loan balances increased from 3.31% to 3.33%. Score increased from 0.38 to 0.48 (including creation fee) for LTV loans by 80%.
  • The average 30-year fixed mortgage rate backed by the FHA increased from 3.39% to 3.40%. Score increased from 0.37 to 0.42 (including creation fee) for 80% LTV loans.
  • Average 30-year interest rates for mega loan balances have fallen from 3.35% to 3.31%. Score increased from 0.34 to 0.38 (including origination fees) for LTV loans by 80%.

Weekly figures from the Mortgage Bankers Association showed that the composite market index, a measure of the volume of mortgage loan applications, fell 2.7% from two weeks earlier. The index fell by 0.6% in the week ending 17y December.

The refinancing index is down 2% compared to the previous two weeks and was 40% lower than the same week a year ago. The index had risen by 2% in the week ending 17y December.

In the week ending December 31, the share of refinancing in mortgage activity increased from 63.9% to 65.4%. The share rose from 63.3% to 65.2% in the week ending December 17.

According to the MBA,

  • Mortgage rates continued to rise over the past two weeks, as markets maintained an optimistic view of the economy.
  • The 30-year fixed rate rose 6 basis points to its highest level since April 2021.
  • High rates at the end of 2021 caused refinancing activity to decline. Demand for refinancing continues to shrink with many borrowers refinancing in 2020 and early 2021. At that time, mortgage rates were about 40 basis points lower.
  • The public buying market also finished slower. The last week was the weakest since October 2021.
  • While average loan sizes have been lower, home prices are still rising at very high levels.
  • Despite supply and affordability challenges, 2021 was a record year for procurement facilities. The MBA expects 2022 to be even stronger with total purchasing activity reaching $1.74 trillion.

for next week

It’s a quieter week for US economic data. Markets will need to wait until Wednesday for the December inflation figures which will be one of the key stats for this week.

After the more hawkish-than-expected FOMC minutes from last week, rising inflation pressure is likely to serve as a green light for a rate hike in March.

On the monetary policy front, Fed Chair Powell is due to testify on Tuesday, which could move the phone call as well.

Elsewhere, inflation figures from China will also attract interest on Wednesday.

Away from the economic calendar, expect COVID-19 news updates to remain a major driver.

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