U.S Mortgage Rates Slide to another All-Time Low

Bob Mason

Sat, Oct 17, 2020, 10:07 PM 4 min read

Mortgage rates fell to another all-time low in the week ending 15^th October. Following a 1 basis point fall in the week prior, the 30-year fixed rate fell by 6 basis points to 2.81%.

Compared to this time last year, 30-year fixed rates were down by 88 basis points.

30-year fixed rates were also down by 213 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the lighter side in the 1^st half of the week.

Key stats included September’s inflation figures ahead of the jobless claims figures on Thursday.

Inflation held steady at the end of the 3^rd quarter, with the annual core rate of inflation unchanged at 1.7%. Economists had forecast a pickup to 1.8%.

Consumer prices saw modest increases in the month of September, however. Core consumer prices and consumer prices increased by just 0.2% following 0.4% increases in August.

Wholesale prices saw a pickup. The producer price index rose by 0.4% in September, following a 0.3% increase in August. Core wholesale prices also rose by 0.4%, following a 0.4% increase from the month prior.

While the stats were mixed, a lack of progress towards a stimulus Bill on Capitol Hill and COVID-19 weighed on Treasury yields.

Freddie Mac Rates

The weekly average rates for new mortgages as of 15^th October were quoted by Freddie Mac to be:

30-year fixed rates decreased by 6 basis points to 2.81% in the week. Rates were down from 3.69% a year ago. The average fee fell from 0.8 points to 0.6 points.

15-year fixed rates fell by 2 basis points to 2.35% in the week. Rates were down from 3.15% a year ago. The average fee fell from 0.7 points to 0.5 points.

5-year fixed rates rose by 1 basis point to 2.90% in the week. Rates were down by 45 points from last year’s 3.35%. The average fee also remained unchanged at 0.2 points.

According to Freddie Mac,

Many people are benefitting from a 10^th record low this year, with refinance activity remaining strong.
It is worth noting, however, that not all people are able to take advantage of low rates given the effects of the pandemic.

Mortgage Bankers’ Association Rates

For the week ending 9^th October, rates were quoted to be:

Average interest rates for 30-year fixed, backed by the FHA, remained unchanged at 3.12%. Points increased from 0.32 to 0.35 (incl. origination fee) for 80% LTV loans.
Average interest rates for 30-year fixed with conforming loan balances decreased from 3.01% to 3.00%. Points fell from 0.37 to 0.32 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances decreased from 3.31% to 3.30%. Points increased from 0.30 to 0.35 (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, decreased by 0.7% in the week ending 9^th October. In the week prior, the index had increased by 4.6%.

The Refinance Index slipped by 0.3% and was 44% higher than the same week a year ago. In the week prior, the index had jumped by 8%.

The refinance share of mortgage activity increased from 65.4% to 65.6%. In the week prior, the share had risen from 63.3% to 65.4%.

According to the MBA,

Mortgage applications for refinances and home purchases both decreased slightly despite 30-year fixed rates falling to a new MBA survey low.
Applications for government mortgages offset some of the overall declines by increasing 3%.
Refinance and purchase activity continues to run well ahead of last year’s pace, fueled by record-low rates and strong homebuyer demand.
House supply is a challenge for many aspiring buyers. Buying activity should continue to stay strong for the rest of the year, however.

For the week ahead

It’s a quiet 1^st half of the week on the U.S economic calendar.

Key stats include September building permits and housing start figures from the U.S.

We would expect the numbers to have a muted impact on U.S Treasury yields, however.

Economic data from late last week will be a test in the early part of the week. Disappointing weekly jobless claims was yet another red flag.

From elsewhere, 3^rd quarter GDP numbers out of China will set the tone at the start of the week.

While we can expect the stats to influence yields, the focus will remain on Capitol Hill and the Presidential Election race. The final live televised presidential debate on Wednesday will garner plenty of attention.

Expect COVID-19 news to also influence. A continued rise in new COVID-19 cases will test market risk appetite that could deliver another record low for mortgage rates.

This article was originally posted on FX Empire