U.S. mortgage rates edged downward as financial markets observed the Presidents Day holiday on Monday. According to the latest national survey from Bankrate, the average rate for a 30-year fixed mortgage settled at 6.13% on February 16, representing a decline of 10 basis points from the previous week. The average 15-year fixed rate was reported at 5.51%, while the average 30-year refinance rate stood at 6.50%.
The movement in borrowing costs comes at a critical juncture for the housing market, where affordability has been a persistent challenge for nearly two years. Even marginal shifts near the 6% threshold can significantly alter monthly payments, potentially influencing buyer decisions as the important spring selling season approaches. This sensitivity underscores why mortgage rates remain a pivotal swing factor for prospective homeowners.
Underpinning the rate adjustment are dynamics in the bond market. The yield on the benchmark 10-year U.S. Treasury note, a primary driver of mortgage pricing, softened to approximately 4.05% at the end of last week, as indicated by Trading Economics data. Yields move inversely to bond prices, and such easing can translate into lower rates on the pricing sheets lenders distribute daily.
Industry commentary suggests a near-term holding pattern. Dan Cooper, Executive Vice President of Capital Markets and Servicing at Cornerstone Home Lending, noted that mortgage rates are likely to remain largely unchanged throughout February. He cited persistently elevated inflation levels and a labor market that is showing signs of softening but not deteriorating sharply as contributing factors to this outlook.
Activity in the mortgage application market was muted last week. Bob Broeksmit, President of the Mortgage Bankers Association, characterized application volume as "essentially flat." Within that stagnant total, a notable trend emerged: borrowers increasingly turned to government-backed FHA loans and adjustable-rate mortgages (ARMs), which typically offer lower initial rates before resetting in future years.
Equity markets tied to housing capitalized on the softer rate environment ahead of the holiday. The SPDR S&P Homebuilders ETF (XHB) climbed 1.9% in Friday's session. Individual homebuilders followed suit, with D.R. Horton (DHI) gaining 1.9%, Lennar (LEN) rising 1.2%, and PulteGroup (PHM) adding 2.7%. Mortgage-related financials also saw strength; Rocket Companies (RKT) surged 5.3% and UWM Holdings (UWMC) advanced 4.1%. In the mortgage REIT space, Annaly Capital Management (NLY) edged up 0.5%, while AGNC Investment Corp. (AGNC) slipped 0.2%. The iShares MBS ETF (MBB), which tracks mortgage-backed securities, increased 0.4%.
Attention now turns to a packed economic calendar as trading resumes on Tuesday. The January retail sales report is scheduled for release at 8:30 a.m. ET, offering a crucial read on consumer health. The Federal Reserve will publish the minutes from its January policy meeting on Wednesday at 2:00 p.m. ET. Further housing data arrives Thursday with pending home sales, followed by a second estimate of fourth-quarter GDP on Friday. A note from Scotiabank highlighted that recent U.S. government data schedules have experienced minor disruptions, introducing a slight element of timing risk around these releases.
The immediate risk for borrowers is that stronger-than-expected economic data could reverse the recent yield decline. A robust retail sales figure or firm GDP reading could prompt bond investors to demand higher yields, leading mortgage lenders to reprice loans upward within hours. Furthermore, the Fed minutes could be interpreted as more hawkish than markets currently anticipate, potentially pulling forward expectations for a prolonged period of elevated policy rates—a scenario traditionally unfavorable for mortgage rates.
For households navigating the market, the practical implication is that today's quoted rate is often a fleeting target. Mortgage pricing is more directly tied to the daily ebb and flow of trading in Treasury and mortgage-backed securities markets than to the Fed's benchmark rate itself. These markets can exhibit heightened volatility during periods of thin liquidity, such as around public holidays.
With markets reopening Tuesday, the immediate focus is on consumer spending data. However, the more consequential test for interest rate trajectories will arrive Wednesday afternoon with the Fed minutes. Traders will scrutinize the document to determine whether last week's modest yield retreat can be sustained or if mortgage rates will snap back to higher levels, setting the tone for the weeks ahead.
