Mortgage rates move slightly higher but remain near record lows

Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. These rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be different. This is especially true since the price adjustment for refinance transactions went into effect earlier this month. The adjustment is 0.5 percent of the loan amount (e.g., it is $1,500 on a $300,000 loan) and applies to all Fannie Mae and Freddie Mac refinances.

The 15-year fixed-rate average slipped to a record low, sinking to 2.17 percent with an average 0.7 point. It was 2.19 percent a week ago and 3.16 percent a year ago. The five-year adjustable rate average also dropped, falling to 2.71 percent with an average 0.4 point. It was 2.79 percent a week ago and 3.46 percent a year ago.

“A normally sleepy holiday week was chock full of political headlines, but the bond market and mortgage rates took the news in stride,” said Matthew Speakman, a Zillow economist. “The confirmation of a trade deal between the European Union and the United Kingdom as well as the long-awaited passage of a new round of fiscal stimulus in the U.S. were both met with modest movements in bond yields, helping mortgage rates stay put at their all-time lowest levels.”

The yield on the 10-year Treasury has been stuck between 0.9 and 0.97 percent this month and has hovered around 0.95 percent since mid-December. It slid to 0.93 percent Wednesday.

The movement of long-term bond yields typically would be the leading indicator of where mortgage rates are headed. But lately, because of the Federal Reserve’s intervention, the mortgage market is more influenced by the central bank’s bond-buying program, which has put downward pressure on rates. Earlier this month, the Fed reaffirmed its commitment to purchasing at least $120 billion of bonds each month.

Even with this week’s modest gain, mortgage rates closed out the year on a steady decline. Three times this month and 16 times this year, they have fallen to historic lows. Since the start of 2020, the 30-year rate has fallen more than a percentage point, going from 3.72 percent in January to 2.66 percent last week. For some context on how remarkably low rates are, since November 2018, when it was 4.94 percent, the 30-year fixed rate has fallen more than two percentage points. At the start of 2000, the 30-year average was 8.15 percent.

“The modest trend downward was a fitting conclusion to a year that has seen mortgage rates plunge to levels that seemed unfathomable a few years ago,” Speakman said. “But as a new year is set to begin, some notable upward risks to mortgage rates loom. Compared to the passage of the newly passed covid-19 relief bill, which markets had been expecting for months, the results of two senate runoff elections in Georgia, and the possibility of more fiscal relief are both far less certain in the eyes of investors and thus could prompt sharp movements in bond yields depending on their outcomes. Until more is known on either of those fronts, meaningful movements in mortgage rates appear unlikely and rates look poised to end 2020 at their lowest levels on record.”

Because of the holidays, the Mortgage Bankers Association did not report mortgage application volume this week. They will release two weeks of data next week.