E Economics

U.S. 30-Year Mortgage Rates Are No Longer Below 3%

27 February, 2021
30Y FNCL Par Coupon


U.S. 30-year mortgage rates have rebounded sharply since two weeks with the 30-year treasury yields spiking above 2.25% on Thursday (highest since January 2020). The recent shock to the Fannie Mae 30-year mortgage — used as a benchmark¬†for U.S. home loans — was meaningful. On a 5-day basis, outside of one time during the Covid crisis last spring, it was the biggest percentage rise in mortgage rates on record.


30Y FNCL Par Coupon


Despite the latest report from Freddie Mac suggests that 30-year mortgage rates were still at 2.97% (highest since August 2020), it seems that reality is a bit different.


U.S. 30-year mortgage rates


Earlier this week, Mortgage News Daily published an interesting article highlighting “Freddie’s data is accurate when it comes to capturing broad trends over time, but can really fall short when the bond market is experiencing elevated volatility“. The paper added “Most any mortgage lender added another eighth of a percent to their 30yr fixed rate offerings. Over the course of the past week, most lenders are .25-.375% higher. And compared to the beginning of last week, many lenders are a full HALF POINT higher. In other words, what had been 2.75% is now 3.25%. What had been 2.875% is now 3.375%.


The spike in mortgage rates has already negative consequences. U.S. home loan purchase applications fell for the third straight week, reaching a 9-month low. Mortgage Bankers Association (MBA) data showed that the purchase index decreased by 11.6 percent (largest drop since April 2020) in week ended February 19, 2021 (v -6.1 percent in the week prior). The index of purchase applications has fallen in four of the last five weeks and is down 23.9 percent from mid-January.


U.S. Home Loan Purchase Applications