U.S Mortgage Rates Ease Back to Support Refinancing

Mortgage rates were on the slide, according to Freddie Mac, with a combination of lower rates and a strong labor market supporting mortgage applications.
Bob Mason
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Mortgage rates hit reverse in the week ending 10th October. 30-year fixed rates fell by 8 basis point to 3.57%, following a 1 basis point rise in the week prior.

The pullback left 30-year rates close to levels last seen in early November of 2016, according to figures released by Freddie Mac.

Compared to this time last year, 30-year fixed rates were down 133 basis points.

More significantly, 30-year fixed rates are down by 137 basis points since last November’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the quieter side throughout the week. Key stats included September inflation figures released on Tuesday and Thursday.

On the monetary policy front, the FOMC minutes on Wednesday also influenced. The minutes revealed that some members are willing to deliver further rate cuts down the road.

With stats on the lighter side, however, geopolitics remained the key driver.

Progress on Brexit and on the U.S – China trade talks supported yields mid-week.

Freddie Mac Rates

The weekly average rates for new mortgages as of 10th October were quoted by Freddie Mac to be:

  • 30-year fixed rates decreased by 8 basis points to 3.57% in the week. Rates were down from 4.90% from a year ago. The average fee remained steady at 0.6 points.
  • 15-year fixed rates fell by 9 basis points to 3.05% in the week. Rates were down from 4.29% from a year ago. The average fee held steady at 0.5 points.
  • 5-year fixed rates slipped by 3 basis points to 3.35% in the week. Rates were down by 72 basis points from last year’s 4.07%. The average fee decreased from 0.4 points to 0.3 points.

According to Freddie Mac, a 50-year low unemployment rate together with low mortgage rates led to an increase in homebuyer demand in the year.

Freddie Mac also noted that much of the strength comes from entry-level buyers. First-time homebuyer share of the loans Freddie Mac purchased in 2019 stood at 46%, a 2-decade high.

Mortgage Bankers’ Association Rates

For the week ending 4th October, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.79% to 3.75%. Points increased from 0.23 to 0.29 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances fell from 3.99% to 3.90%. Points fell from 0.38 to 0.37 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.98% to 3.90%. Points remained unchanged at 0.28 (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 5.2% in the week ending 4th October. In the week ending 27th September, the Market Composite Index had risen by 8.1%.

The Refinance Index increased by 10% in the week ending 4th October, leaving the index up by 163% from the previous year. The Index had jumped by 14% in the week ending 27th September.

The share of refinance mortgage activity increased from 58.0% to 60.4%, following on from a rise from 54.9% to 58.0% in the week prior.

According to the MBA, yields fell sharply in the week as a result of weaker service sector data that raised yet more red flags. In September, weakness in private sector growth was no longer confined to the manufacturing sector. The surveys revealed that service sector growth was also beginning to wane.

A resulting flight to safety led to a drop in mortgage rates across the board, leaving 30-year fixed rates at their lowest level in a month.

For the week ahead

It’s a busier week on the economic data front.

Economic data includes NY and Philly manufacturing figures on Tuesday and Thursday and retail sales figures on Wednesday.

From the housing sector, building approvals and housing starts are also due out.

While we can expect the stats to influence, geopolitics will continue to be in focus. Progress on trade talks between the U.S and China and Brexit would support yields, which could lead to a pickup in rates.

The stats would need to support, however, with retails sales and the Philly FED Manufacturing Index the key drivers.

From elsewhere, trade data out of China will also impact yields at the start of the week.

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