U.S Mortgage Rates Slide Again, with Purchase Applications also on the Slide

Bob Mason

Sat, Apr 4, 2020, 9:41 PM 5 min read

Economic Data from the Week

Economic data was on the busier side through the week, with March private sector PMIs and labor market figures in focus.

While both the ISM Manufacturing PMI and ISM Non-Manufacturing PMI reported continued to expand in March, it was labor market figures that spooked the markets.

While ADP Nonfarm Employment fell by just 27,000 in March, initial jobless claims surged by 6,648,000 in the week ending 27^th March. The new record towered above the previous week’s 3,283,000, which had also been a record high.

The markets had expected another sharp rise but not by such a number, with economists having forecasted claims rising by 3,500,000.

With consumer confidence on the decline in March, the extended lockdown in the U.S in April will weigh heavily on confidence and spending. The PMIs may have pointed to continued expansion in March but it could well be a different story in April, particularly for the services sector.

All of this, coupled with the continued spread of the coronavirus and forecasts of between 100,000 and 240,000 deaths added further downward pressure on mortgage rates.

Freddie Mac Rates

The weekly average rates for new mortgages as of 2^nd April were quoted by Freddie Mac to be:

30-year fixed rates fell by 17 basis points to 3.33% in the week. Rates were down from 4.08% from a year ago. The average fee remained unchanged at 0.7 points.

15-year fixed fell by 10 basis points 2.82% in the week. Rates were down from 3.56% compared with a year ago. The average fee remained unchanged at 0.6 points.

5-year fixed rates rose by 6 basis points to 3.40% in the week. Rates were down by 26 points from last year’s 3.66%. The average fee held steady at 0.3 points.

According to Freddie Mac, the 2^nd consecutive weekly decline reflected improvements in market liquidity and sentiment. While the market has stabilized relative to prior weeks, homebuyer demand has declined in response to current economic conditions. Freddie Mac pointed out that pending economic stimulus is on the way, however, to provide support to both consumers and businesses.

Mortgage Bankers’ Association Rates

For the week ending 27^th March, rates were quoted to be:

Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.69% to 3.57. Points decreased from 0.43 to 0.28 (incl. origination fee) for 80% LTV loans.
Average interest rates for 30-year fixed with conforming loan balances decreased from 3.82% to 3.47%. Points decreased from 0.35 to 0.33 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances remained unchanged at 3.84%. Points fell from 0.35 to 0.31 (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 15.3% in the week ending 27^th March. In the week prior, the Index had tumbled by 29.4%.

The Refinance Index surged by 26% and was up by 168 from the same week a year ago. In the previous week, the Index had slumped by 34%.

The refinance share of mortgage activity increased from 69.3% to 75.9% in the week ending 27^th March. In the week prior, the share had decreased from 74.5% to 69.3%.

According to the MBA:

Mortgage applications and rates continue to experience significant volatility from economic and financial market uncertainty.
The continued spread of the coronavirus has driven the uncertainty and a bleaker economic outlook.
A marked surge in job losses likely caused potential homebuyers to a pullback in the week.
Purchase applications were down by over 10%. After double-digit annual growth to start 2020, activity has fallen off last year’s pace for 2 consecutive weeks.

For the week ahead

It’s a relatively quiet 1^st half of the week for the Greenback.

Key stats in the week are limited to JOLTs job openings, March inflation, and April consumer sentiment figures. The weekly jobless claims figures are also in focus.

February JOLTs job openings should have a muted impact on yields, with consumer sentiment and weekly jobless claims likely to have the greatest impact.

The markets will expect another surge in claims and a slide in sentiment. The sentiment figure will also give an indication of the consumer view on the administration’s Stimulus Bill. $1,200 per person may not be of much comfort when considering what lies ahead.

While the stats will influence, the coronavirus numbers will remain the key driver in the week. Last week, Trump had warned of a tough 2-weeks ahead…

This article was originally posted on FX Empire