Mortgage rates have continued their trend towards stability in January, with Freddie Mac's latest Primary Mortgage Market survey indicating that 30-year fixed-rate mortgages remained unchanged week-over-week at 4.45 percent.
"Mortgage rates have stabilized during the last month and are essentially at the same level as last spring–yet the most recent home sales are roughly half a million lower over the same period," said Sam Khater, Chief Economist, Freddie Mac. "Given that the economy remains on solid footing and weekly mortgage purchase application activity has been strong so far in 2019, we expect the decline in home sales to moderate or even reverse over the next couple of months."
While December's existing home sales hit a three-year low, these closings were influenced by the near 5 percent mortgage rates that buyers faced in November. However, the 4.5 percent rates we've seen since the beginning of the year have sparked an uptick in mortgage application activity, which has also helped increase homebuilder confidence," said Danielle Hale, Chief Economist at realtor.com.
According to the FHFA indices, interest rates on conventional purchase-money mortgages remained nearly flat month-over-month. While the average interest rate on all mortgage loans remained unchanged from November at 4.82 percent, the national average contract mortgage rate for the purchase of previously occupied homes by combined lenders index was 4.83 percent for loans closed in late December, down by three basis points from 4.86 percent in November.
The FHFA indices also indicated a slight dip in the average interest rate on conventional 30-year fixed-rate mortgages of $453,100 or less at 4.98 percent in December from 4.99 percent in November.
However, the effective interest rate on all mortgage loans rose 1 basis point to 4.92 percent even as the average loan amount for all loans remained unchanged at $318,600, FHFA noted.
"Looking ahead, we may see increased contract signing activity reported in next week's pending home sales release, which will be an even more important given the absence of this week’s new home sales report. However, we may not see the pick up in contract signing until January,” Hale noted.