U.S Mortgage Rates See Slight Uptick, While Applications Slide

Bob Mason

Sat, Aug 31, 2019, 11:56 PM

Economic Data from the Week

Key stats through the first half of the week were on the lighter side.

July durable goods orders delivered mixed results on Monday. While durable goods orders jumped by 2.1%, core durable goods orders fell by 0.4%.

In spite of the negative numbers, it was risk-on through the start of the week, supported by a shift in trade rhetoric.

Consumer confidence figures on Wednesday also provided support. Whilst the CB Consumer Confidence Index eased from 135.8 to 135.1, the relatively steady levels supported the near-term outlook for consumer spending.

Even a yield curve inversion to levels not seen since 2007 on Wednesday failed to weigh on mortgage rates.

Freddie Mac Rates

The weekly average rates for new mortgages as of 29^th August were quoted by Freddie Mac to be:

30-year fixed rates increased by 3 basis points to 3.58% in the week. Rates were down from 4.52% from a year ago. The average fee remained unchanged at 0.5 points.

15-year fixed rates also increased by 3 basis points to 3.06% in the week. Rates were down from 3.97% from a year ago. The average fee also held steady at 0.5 points.

5-year fixed rates rose by 1 basis point to 3.31% in the week. Rates were down by 54 basis points from last year’s 3.85%. The average fee increased from 0.3 points to 0.4 points.

According to Freddie Mac, falling mortgage rates and a strong labor market continue to fuel the consumer-driven economy.

For the month of August, the 30-year fixed-rate mortgage rate averaged 3.6%, almost 1% down year-on-year, supporting consumer purchasing power.

Mortgage Bankers’ Association Rates

For the week ending 23^rd August, rates were quoted to be:

Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.87% to 3.80%. Points increased from 0.32 to 0.33 (incl. origination fee) for 80% LTV loans.
Average interest rates for 30-year fixed with conforming loan balances rose from 3.90% to 3.94%. Points increased from 0.35 to 0.38 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances increased from 3.88% to 3.89%. Points rose from 0.24 to 0.26 (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, slid by 6.2% in the week ending 23^rd August. In the week ending 16^th August, the Market Composite Index had fallen by 0.9%.

The Refinance Index tumbled by 8% in the week ending 23^rd August, leaving the index up by 167% year-on-year. The fall reversed a 0.4% rise in the week ending 16^th August.

The share of refinance mortgage activity decreased from 62.7% to 62.4%, following on from a rise from 61.4% to 62.7% in the week prior.

According to the MBA, it was a volatile week in the U.S bond markets. The ongoing trade dispute between the U.S and China continued to deliver uncertainty to the markets.

Mortgage rates increased for the 1^st time since the week of July 12^th, however. In spite of the rise, rates were still down by 80 basis points year-to-date.

The MBA also noted that, while purchase applications were still up by 2% year-on-year, the slide in mortgage rates have not yet delivered a material boost to activity. This was attributed to uncertainty over the near-term economic outlook and low supply levels.

For the week ahead

It’s a relatively quiet first half of the week ahead.

Key stats due out of the U.S include August manufacturing PMI figures due out on Tuesday and July trade data on Wednesday.

We can expect the market focus to be on Tuesday’s ISM Manufacturing PMI.

With the U.S markets closed on Monday, Thursday’s ADP nonfarm payroll and ISM non-manufacturing PMI figures will also influence.

From outside of the U.S, expect private sector PMI numbers out of China and the Eurozone on Monday and Wednesday to also influence.

Weak numbers will likely invert the 10-year – 2-year Treasury yield curve once more.

Outside of the numbers

Further updates from both Beijing and Washington on trade, updates on Brexit and FOMC member chatter will also have a material impact on U.S Treasuries.

Any sudden shift in rhetoric from either Beijing or Washington would likely drive rates lower in the week ahead.

Fresh tariffs over the weekend on an additional $112bn worth of Chinese goods could test risk appetite at the start of the week.

This article was originally posted on FX Empire

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