U.S Mortgage Rates Rise but only Marginally

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Bob Mason

Sat, Nov 30, 2019, 7:41 PM

Economic Data from the Week

While it was a shortened week for the U.S markets, with the Thanksgiving holidays on Thursday, stats were on the heavier side.

Key stats included November business confidence figures on Tuesday and 3^rd quarter GDP and October durable goods orders on Wednesday.

In spite of a fall in the CB Consumer Confidence Index from 126.10 to 125.50 in November, the fall was considered moderate.

Positive updates from the U.S on trade provided yields with support in the early part of the week.

On Wednesday, 3^rd estimate GDP numbers for the 3^rd quarter impressed, with the GDP upwardly revised from 1.9% to 2.1%.

Also supporting risk appetite on the day were solid durable goods and core durable goods orders. Both rose by 0.6% in October, coming in well ahead of forecasts.

On the negative, however, was an easing in inflationary pressures. The Core PCE Price Index rose by 1.6% in October, easing back from a 1.7% rise in September.

From the housing sector, new home sales and pending home sales disappointed, with declines of 0.7% and 1.7% respectively.

Following the impressive housing start and building permit numbers, the numbers had a muted impact, however.

Freddie Mac Rates

The weekly average rates for new mortgages as of 27^th November were quoted by Freddie Mac to be:

30-year fixed rates increased by 2 basis points to 3.68% in the week. Rates were down from 4.81% from a year ago. The average fee fell from 0.6 points to 0.5 points.

15-year fixed rates held steady at 3.15% in the week. Rates were down from 4.25% from a year ago. The average fee held steady at 0.5 points.

5-year fixed rates increased by 4 basis points to 3.43% in the week. Rates were down by 69 basis points from last year’s 4.12%. The average fee held fell from 0.4 points to 0.3 points.

According to Freddie Mac, mortgage rates have traded narrower over the last 2-months. After the downward trend in the 1^st nine months of the year, an improved economic outlook has supported an upward drift.

While the housing market had a delayed reaction to the slide in mortgage rates, real estate volumes have jumped.

Freddie Mac also noted that recent improvements in the cyclical segments of the economy, together with easing financial conditions, were also positive for the housing market.

Mortgage Bankers’ Association Rates

For the week ending 22^nd November, rates were quoted to be:

Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.80% to 3.79%. Points fell from 0.32 to 0.23 (incl. origination fee) for 80% LTV loans.
Average interest rates for 30-year fixed with conforming loan balances fell from 3.99% to 3.97%. Points decreased from 0.33 to 0.30 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances decreased from 3.93% to 3.87%. Points increased from 0.28 to 0.29 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, increased by 1.5% in the week ending 22^nd November. In the week ending 15^th November, the Mortgage Composite Index had fallen by 2.2%.

The Refinance Index increased by 4% in the week ending 22^nd November and was 314% higher than the same week a year ago. The Index had fallen by 8% in the week ending 15^th November.

The share of refinance mortgage activity increased from 59.5% to 62.0% in the week, reversing a fall from 61.9 to 59.5 in the week prior.

According to the MBA, with mortgage rates sitting at sub-4% for a 2^nd consecutive week, applications were on the rise.

The MBA also noted that, while refinances have been strong, the average pace has slowed since August through October.

With 5 weeks of reporting data left in 2019, the mortgage market is reportedly on track for its best year for originations since 2007…

For the week ahead

It’s a relatively busy first half of the week on the economic data front.

Key stats include the market’s preferred ISM Manufacturing and Non-Manufacturing PMI figures for November and ADP nonfarm employment change numbers.

Barring material deviation from prelims, finalized Markit PMI numbers will likely have a muted impact on yields.

Outside of the numbers, however, expect updates from the U.S and China on trade to ultimately continue to drive yields.

Trump signed the HK Bill to protect HK protesters, which riled Beijing. How Beijing responds and whether the U.S and China remain on course for a phase 1 agreement will be the main area of focus.

This article was originally posted on FX Empire