It was another relatively quiet week for mortgage markets, as the major economic data and the European Central Bank meeting were in line with expectations. Rates remained near record low levels.
The reduced economic activity resulting from the coronavirus has caused a decline in inflation, which has helped keep mortgage rates low. The Consumer Price Index (CPI) is a widely followed monthly inflation report that looks at the price change for goods and services. In November, the core PCE price index was just 1.6% higher than a year ago, down from an annual rate of increase above 2.0% in the months prior to pandemic.
Thursday’s European Central Bank (ECB) meeting produced no surprises and caused little reaction. As expected, the ECB made no change in rates and expanded its massive bond purchase program by an additional 500 billion euros ($605 billion) to support economic growth. Officials said that bond buying will continue until “the coronavirus phase is over.”
The results of record low mortgage rates have been seen in the weekly data from the Mortgage Bankers Association (MBA). According to their latest figures, mortgage applications to purchase a home were 22% higher than a year ago at this time, despite the obstacles posed by the pandemic. Mortgage applications to refinance, which are more heavily influenced by rates, are an amazing 89% higher than a year ago.
Looking ahead, investors will continue watching Covid case counts, progress on vaccines, and negotiations for additional government stimulus. Beyond that, the next Fed meeting will take place on Wednesday. Retail Sales will be released on Wednesday as well. Since consumer spending accounts for over two-thirds of all economic activity in the US, the retail sales data is a key indicator of growth. Housing Starts will come out on Thursday.
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Raleigh Mortgage Group, Inc.
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