Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders nationwide 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 in December. 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 dipped to 2.20 percent, with an average 0.6 point. It was 2.21 percent a week ago and 3 percent a year ago. The five-year adjustable-rate average was unchanged at 2.80 percent, with an average 0.3 point. It was 3.24 percent a year ago.
“After spiking in early January, mortgage rates have spent the last couple weeks trending consistently lower, as the continued spread of the virus, the introduction of new, more virulent variants, and a thus-far sluggish rollout of the vaccine all injected fresh uncertainty into markets,” said Matthew Speakman, a Zillow economist. “Uncertainty surrounding the latest proposed fiscal relief plan also lowered investors’ expectations for higher bond yields, and thus mortgage rates.”
No major policy changes came out of the Federal Reserve’s meeting this week. The Fed kept its benchmark rate at zero and renewed its commitment to purchase $120 billion in bonds each month. Since it began its bond-buying program early in the pandemic, the central bank has increased its balance sheet to nearly $7.5 trillion.
Investors were watching to see if the Fed signaled it would begin to taper its purchases in the near term. In 2013, when then-Federal Reserve Chair Ben S. Bernanke testified before Congress about a reduction in the government’s bond-buying program, the resulting “taper tantrum” in the market sent mortgage rates soaring.
Fed Chair Jerome H. Powell dismissed speculation about a reduction in the bond-buying program.
“In terms of tapering, it’s just premature,” he told reporters.
He said the economy is a “long way” from the Fed’s monetary policy and inflation goals, and he expects it to take some time for progress to be achieved.
“The Fed has promised to keep interest rates low through 2021, and after this week’s meetings, it’s great to see the Fed [has] fulfilled this promise and held the interest rates at near zero,” said Alec Hartman, chief executive and co-founder of Welcome Homes, an online home-building company. “As a result, we’re going to continue to see record mortgage volumes in 2021.”
Low interest rates won’t be the only thing driving the housing market. Hartman expects President Biden to enact policies that encourage home-buying.
“The administration has signaled its willingness to create an environment to foster homeownership, especially for first-time home buyers,” he said. “In addition to low interest rates, we can anticipate there will be many bonus programs available until inflation passes 2 percent per year.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found nearly half the experts it surveyed predict rates will move lower in the coming week. James Sahnger, a mortgage planner at C2 Financial, is one who is predicting rates will fall.
“The froth on the 10-year Treasury has come off a bit after peaking at 1.18 percent two weeks ago after a quick run-up of 26 basis points in just a week earlier,” he said. “Stocks have been selling off a bit, with the torrid exception of GameStop. As money has left stocks, bonds have been the beneficiary and rates have improved. … Look for rates to drift a little lower as stocks should continue to do the same.”
Meanwhile, mortgage applications pulled back last week. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 4.1 percent from a week earlier. The purchase index fell 4 percent from the previous week, but was 16 percent higher than a year ago. The refinance index dropped 5 percent, but was 83 percent higher than a year ago. The refinance share of mortgage activity accounted for 70.7 percent of applications.
“Applications for refinances in early 2021 are outpacing the fast start seen in 2020, even as a slight rise in mortgage rates pulled activity lower last week,” said Bob Broeksmit, MBA president and chief executive. “Home-buyer demand is also very strong, but home shoppers are competing for a limited number of homes on the market. The supply-and-demand imbalance is accelerating home-price appreciation and continues to push up the average loan balance of purchase applications.”
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