U.S Mortgage Rates – 30-Year Rates Steady while Applications Surge

Mortgage rates held steady in the week ending 13^th June, bring to an end 6 consecutive weeks of decline. 30-year fixed rates remained unchanged at 3.82% following a 17 basis points slump from the previous week. That left 30-year rates at a 2-year low according to figures released by Freddie Mac.

Compared to this time last year, 30-year fixed rates were down by 80 basis points.

More significantly, 30-year fixed rates have fallen by 112 basis points since last November’s most recent peak of 4.94%.

Economic Data from the Week

It was a relatively quiet 1^st half of the week. Key stats out of the U.S included JOLTs job openings figures and wholesale and consumer price figures.

The previous week’s nonfarm payroll and wage growth figures were also of influence.

While April’s JOLT’s job openings came in ahead of forecasts, job openings eased compared to March, providing little support.

Of greater influence from the economic calendar was softer inflation figures. The annual rate of baseline inflation eased from 2.1% to 2.0% in May.

While the economic calendar supported the FED’s more dovish sentiment towards monetary policy, it was easing trade tensions between the U.S and Mexico that supported demand for U.S Treasuries.

Mexico and the U.S reached a final hour agreement to avoid the rollout of 5% tariffs on Mexican goods on Monday, 10^th June.

In spite of the U.S – Mexico agreement, jitters over the extended U.S – China trade war continued to pin back yields.

Freddie Mac Rates

The weekly average rates for new mortgages as of 13^th June were quoted by Freddie Mac to be:

• 30-year fixed rates held steady at 3.82% in the week. Rates were down from 4.62% from a year ago. The average fee increased from 0.5 points to 0.6 points.

• 15-year fixed rates fell by 2 basis points to 3.26% in the week. Rates were down from 4.07% from a year ago. The average fee held steady at 0.5 points.

• 5-year fixed rates fell by 1 basis point to 3.51% in the week. Rates were down by 32 basis points from last year’s 3.83%. The average fee held steady at 0.4 points.

According to Freddie Mac, the U.S – Mexico agreement, which avoided the rollout of tariffs, supported yields that left mortgage rates unchanged.

In spite of 30-year rates holding steady, mortgage rates continued to sit at historical lows supporting refinancing and home buyer activity.

Mortgage Bankers’ Association Rates

For the week ending 7^th June, rates were quoted to be:

• Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.24% to 4.09%. Points decreased from 0.33 to 0.26 (incl. origination fee) for 80% LTV loans.
• Average interest rates for 30-year fixed with conforming loan balances fell from 4.23% to 4.12%. Points remained unchanged at 0.33 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 4.09% to 4.04%. Points decreased from 0.21 to 0.17 (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, surged by 26.8% in the week ending 7^th June. The increase followed on from a 1.5% increase in the week ending 31^st May.

The Refinance Index jumped by 47% in the week ending 31^st May. The Index had increased by 6% in the previous week ending 31^st May.

The share of refinance mortgage activity increased from 42.2% to 49.8%, following an increase from 39.7% to 42.2% in the week prior.

According to the MBA, mortgage rates for all loan types fell for a 2^nd consecutive week, weighed by U.S trade tensions with China and Mexico. More dovish chatter from the FED and disappointing nonfarm payroll figures also contributed to the pullback in rates. The MBA numbers lag the Freddie Mac numbers by a week.

In spite of a more dovish FED, both purchase and refinance applications surged.

The refinance index hit its highest level since 2016. 30-year fixed mortgage rates had hit a 2016 low 3.41% supporting demand for applications at the time.

Mortgage Bankers Association Builder Application Survey

The Mortgage Bankers Association also released their May 2019 Builder Application Survey. According to the latest survey,

• New home purchases increased by 20.1% year-on-year in May. Month-on-month, applications increased by just 0.1%.
• The average loan size for new home applications decreased by almost 3%, reflective of the continued slowdown in house price growth and shift to building lower-priced homes.

For the week ahead

It was yet another relatively quiet 1^st half of the week. June NY Empire State manufacturing index numbers are due out on Monday.

From the housing sector, May building permit and housing start figures, due out on Tuesday, will also be of interest.

The lighter set of stats will have a limited impact on U.S Treasury yields, however, with the FED’s interest rate decision on Wednesday’s and release of the FOMC economic projections of greater influence.

Following last week’s retail sales figures, will softer inflation and disappointing NFP numbers be enough for the FED to signal a rate cut?

We can expect some support for U.S Treasury yields at the start of the week, following retail sales figures released last week.

Outside of the stats and monetary policy, U.S – China trade war chatter will also be of interest. The much talked about G20 Summit kicks off in less than 2-weeks.