Impressive COVID-19 Vaccine Trial Leads To rising In U.S Mortgage Rates

In the week ending 12th November, the mortgage rates rose for the 2nd time in 3-weeks. Last year, the 30-year fixed rates were down by 91 basis points. 

30-year fixed rates were also down by 210 basis points since November 2018’s most recent peak of 4.94%. 

Reversing a 3 basis point fall to a 12th record low 2.78% in the week prior, the 30-year fixed rate rose by 6 basis points.

The Economic data in the 1st half of the week showed a fall in job openings from August’s 6.493m to 6.440m.

The vaccine trial results of COVID-19 from Pfizer Inc. and BioNTech SE drove demand for riskier assets early in the week. 

In the 3rd phase of vaccine trials on Monday, Pfizer Inc. reported more than a 90% efficacy rate. The impressive results nullified any concerns over the continued rise in new COVID-19 cases globally.

Biden’s Presidential Election victory announcement from the weekend prior was also considered positive for riskier assets. 

The markets were also convinced that Trump’s lawsuits and state recounts would fail to overturn the result.

As of 12th November Freddie Mac quoted the weekly average rates for new mortgages 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

• The Mortgage rates jumped as a result of positive news about a COVID-19 vaccine.
• In spite of the rise, mortgage rates compared to last year remain about a percentage point below.
• The low rate environment is supportive of both purchase and refinances demand.
• The housing market continues to grow and support the economy while heading into late fall.

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 the 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% compared to last year.
• 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.