In the closing months of 2023, mortgage and other long-term interest rates declined appreciably, but the calendar has now changed to 2024, and it's the start of a new year, new quarter and new month for financial markets. With the change in the calendar, it's not uncommon at all to see a change in the pattern for interest rates, and we're seeing a bit of that now.
It's too soon to tell whether it will be a minor or more substantial adjustment, but the longer-term yields which influence mortgage rates have turned higher of late, with the yield on the 10-year Treasury rising from about 3.8% last week to something closer to 4% for this one. While that's not a huge move, it does suggest that mortgage rates are retracing at least a bit of their recent decline. This week comes the first full business week of the new year, a week which in the past has been one which either confirms or refutes the change in the market we're see now.
Not yet on the rise are mortgage applications. This week should see the typical post-holiday re-engagement in the mortgage market by consumers, but the holiday-shortened week between Christmas and New Year’s was quiet. The Mortgage Bankers Association noted that in the week ending December 29, overall requests for mortgage credit declined by 10.7%, pulled down by a 7.6% drop in requests for purchase-money mortgages and an 18.1% decline in those to refinance existing loans. Mortgage rates may be firming a little at the moment but remain well below where they were when the holiday season began around Thanksgiving, so there should be at least a little pent-up and seasonal demand to be expressed in the coming weeks, provided rates remain well behaved.
The pattern shifts for the yields that influence fixed mortgage rates will cause a bit of an uptick in this week, even though the most market-moving data (Consumer and Producer Price Indexes) doesn’t come until Thursday and Friday, respectively. Based upon where yields were the previous week and where they ended last week, it seems likely that we'll see a modest increase of perhaps 8-11 basis points in the average offered rate for a conforming 30-year FRM as reported by Freddie Mac when Thursday's fresh update comes out. That isn't especially welcome news, but not uncommon or unexpected.