U.S Mortgage Rates Drop Back to sub-3%

Mortgage rates fell for the 6^th time in 10-weeks in the week ending 1^st July

Partially reversing a 9 basis points rise from the previous week, 30-year fixed rates decreased by 4 basis points to 2.98%.

Since 21^st April, 30-year mortgage rates had risen just once beyond the 3% mark before the decline. The solo visit was in the previous week.

Compared to this time last year, 30-year fixed rates were down by 9 basis points.

30-year fixed rates were still down by 196 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a quiet first half of the week on the U.S economic calendar.

Key stats included consumer confidence, ADP nonfarm employment change, and ISM manufacturing PMI figures.

The stats were skewed to the positive in the week, with consumer confidence hitting a 16-month high in June.

ADP nonfarm employment change figures also impressed, with the ADP reporting a 692k increase in nonfarm payrolls.

For the markets, the only negative was a modest decline in the ISM Manufacturing PMI from 61.2 to 60.6.

While the stats were skewed to the positive, market jitters over inflation eased in the week, supporting the downward trend in mortgage rates.

Freddie Mac Rates

The weekly average rates for new mortgages as of 1^st July were quoted by Freddie Mac to be:

• 30-year fixed rates fell by 4 basis points to 2.98% in the week. This time last year, rates had stood at 3.07%. The average fee fell from 0.7 points to 0.6 points.

• 15-year fixed declined by 8 basis points to 2.26% in the week. Rates were down by 30 basis points from 2.56% a year ago. The average fee remained unchanged 0.7 points.

• 5-year fixed rates increased by 1 basis point to 2.54%. Rates were down by 46 points from 3.10% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

• Economic growth remains steady and is bolstering more segments of the economy.
• Although low and stable mortgage rates have kept the housing market booming in recent months, a deterioration in affordability and for-sale inventory has led to a market slowdown.

Mortgage Bankers’ Association Rates

For the week ending 25^th June, the rates were:

• Average interest rates for 30-year fixed to conforming loan balances increased from 3.18% to 3.20%. Points decreased from 0.48 to 0.39 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA decreased from 3.21% to 3.19%. Points remained unchanged at 0.34 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 3.26% to 3.23%. Points decreased from 0.44 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, decreased by 6.9% in the week ending 25^th June. In the week prior, the index had increased by 2.1%.

The Refinance Index fell by 8% from the previous week and was 15% lower than the same week a year ago. The Index had risen by 3% in the previous week.

In the week ending 25^th June, the refinance share of mortgage activity had fallen from 62.5% to 61.9%. The share had increased from 61.7% to 62.5% in the previous week.

According to the MBA,

• Mortgage application volume fell to the lowest level in almost 18-months, with declines in both refinance and purchase applications.
• Rates were volatile last week as investors tried to gauge upcoming moves by the FED amidst divergent signals.
• Rising inflation, mixed job market data, strong consumer spending, and a supply-constrained housing market were key considerations.
• The average loan size for purchase applications increased, indicating that 1^st time buyers are likely getting squeezed out of the market.

For the week ahead

It’s a quieter first half of the week. ISM Non-Manufacturing PMI figures for June will be in focus on Tuesday.

On Wednesday, JOLT’s job openings will also draw attention along with any FOMC member chatter in the week.