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U.S Mortgage Rates Continue to Hover at Close to Record Lows

U.S mortgage rates see a slight uptick as mortgage application volume continues to recover. Economic uncertainty will likely pin back rates near-term.
Bob Mason
Mortgage application loan agreement and house key

Mortgage rates saw another slight uptick in the week ending 14th May to deliver just a 4th weekly increase in 8-weeks.

30-Year fixed rates rose by 2 basis points to 3.28%. In the previous week, mortgage rates had risen by 3 basis points to 3.26%.

In spite of the uptick, mortgage rates continued to hover close to an all-time low.

Compared to this time last year, 30-year fixed rates were down by 79 basis points.

30-year fixed rates were also down by 168 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 1st half of the week once more. April inflation figures were in focus, which reflected the anticipated easing in inflationary pressures.

A slump in consumption and sliding crude oil prices left the U.S annual rate of core inflation at 1.40%. In March, the annual rate of core inflation had stood at 2.10%.

On Thursday, the weekly jobless claims figures did little to inspire, with initial jobless claims surging by another 2.981m.

With the stats skewed to the negative, FED Chair Powell added to the risk aversion in the week. In a scheduled speech on Wednesday, the FED Chair delivered a frank and dire outlook on the U.S economy.

In spite of the negative sentiment across the week, continued plans to ease lockdown measures have provided support.

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Freddie Mac Rates

The weekly average rates for new mortgages as of 14th May were quoted by Freddie Mac to be:

  • 30-year fixed rates rose by 2 basis points to 3.28% in the week. Rates were down from 4.07% from a year ago. The average fee remained unchanged at 0.7 points.
  • 15-year fixed declined by 1 basis point to 2.72% in the week. Rates were down from 3.53% compared with a year ago. The average fee also remained unchanged at 0.7 points.
  • 5-year fixed rates increased by 1 basis point to 3.18% in the week. Rates were down by 48 points from last year’s 3.56%. The average fee remained unchanged at 0.3 points.

According to Freddie Mac, mortgage rates continued to sit near to record lows as homebuyer demand slowly picked up.

While purchase demand tumbled to a new low in mid-April, purchase demand is now down by just 10% from a year ago. In spite of the pickup in demand, inventories are low and declining, however, which will limit purchase activity.

Mortgage Bankers’ Association Rates

For the week ending 8th May, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, remained unchanged at 3.37. Points increased from 0.20 to 0.21 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 3.40% to 3.43%. Points decreased from 0.30 to 0.29 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances remained unchanged at 3.69%. Points decreased from 0.34 to 0.33 (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 0.3% in the week ending 8th May. In the week prior, the Index had increased by just 0.1%.

The Refinance Index fell by 3% from the previous week and was up by 201% from the same week one year ago. In the week prior, the Refinance Index had declined by 2%.

The refinance share of mortgage activity fell from 70.0% to 67.0% of total applications in the week. In the previous week, the share had fallen from 71.6% to 70% of total applications.

According to the MBA:

  • The recovery in purchase applications continued, with most large states reporting increases in activity.
  • Purchase activity is expected to continue recovering as social distancing measures are eased across the U.S.
  • Mortgage rates stayed close to record-lows, while refinance applications fell for a 4th consecutive week.
  • In spite of the fall in refinance applications, refinance activity was up by 200% from a year ago.

On Thursday, the MBA also reported April’s monthly application figures. Compared with March 2020, applications fell by 25%.

For the week ahead

It’s a relatively quiet start to the week for the Greenback.

In the 1st half of the week, economic data is limited to April housing sector figures. Building permits and housing starts are due out and will likely reflect the construction sector’s concerns over COVID-19.

On Thursday, however, economic data is on the heavier side and will likely influence U.S Treasury yields.

May’s prelim private sector PMIs, the Philly FED Manufacturing Index, and weekly jobless claims figures are due out of the U.S.

As lockdown measures ease, the markets are looking for an improvement in the stats. Another round of weak figures will drive demand for U.S Treasuries, which should pin back mortgage rates.

Away from the economic calendar, geopolitics and COVID-19 news will also provide direction in the week ahead.

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