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Bob Mason
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Mortgage application loan agreement and house key

Mortgage rates fell for the 3rd time in 5-weeks in the week ending 17th June.

Following a 3 basis points decline from the previous week, 30-year fixed rates decreased by 3 basis points to 2.93%.

The modest decline in mortgage rates left 30-year fixed rates at sub-3% for a 4th consecutive week.

Compared to this time last year, 30-year fixed rates were down by 20 basis points.

30-year fixed rates were still down by 201 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

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

On Tuesday, wholesale inflation and retail sales figures were in focus.

While wholesale inflationary pressures continued to build, retail sales disappointed in May.

Month-on-month, core retail sales fell by 0.7%, with retail sales sliding by 1.3%. Economists had forecast core retail sales to rise by 0.2% and for retail sales to fall by a more modest 0.8%.

Industrial production, manufacturing figures form NY State, and business inventories were also out but had a muted impact on the markets.

On Wednesday, the focus shifted to the FED’s monetary policy decision and FOMC projections that drove yields and the Dollar northwards.

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Freddie Mac Rates

The weekly average rates for new mortgages as of 17th June were quoted by Freddie Mac to be:

  • 30-year fixed rates fell by 3 basis points to 2.93% in the week. This time last year, rates had stood at 3.13%. The average fee remained unchanged at 0.7 points.
  • 15-year fixed rose by 1 basis point to 2.24% in the week. Rates were down by 34 basis points from 2.58% a year ago. The average fee remained unchanged at 0.6 points.
  • 5-year fixed rates decreased by 3 basis points to 2.52%. Rates were down by 57 points from 3.07% a year ago. The average fee increased from 0.2 points to 0.3 points.

According to Freddie Mac,

  • Mortgage rates continued to drift down as markets concur with the view that inflation increases are temporary.
  • While mortgage rates are low, purchase demand has weakened over the last couple of months.
  • The downward trend was attributed to affordability constraints stemming from high home prices.
  • With inventory tight, the slowdown in demand has yet to impact prices, meaning the summer will likely remain a strong seller’s market.

Mortgage Bankers’ Association Rates

For the week ending 11th June, the rates were:

  • Average interest rates for 30-year fixed to conforming loan balances decreased from 3.15% to 3.11%. Points increased from 0.34 to 0.36 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA increased from 3.12% to 3.14%. Points fell from 0.34 to 0.33 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.29% to 3.20%. Points increased from 0.32 to 0.46 (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 4.2% in the week ending 11th June. In the week prior, the index had fallen by 3.1%.

The Refinance Index rose by 6% and was 22% lower than the same week one year ago. The Index had declined by 5% from the previous week.

In the week ending 11th June, the refinance share of mortgage activity increased from 60.4% to 61.7%. The share had declined from 61.3% to 60.4% in the previous week.

According to the MBA,

  • Mortgage applications bounced back after three weeks of decline.
  • Both purchase and refinance applications were up.
  • Demand returned as 30-year fixed rates fell for a third straight week to its lowest level since early May.
  • Market uncertainty over inflation and how the FED would respond led to a fall in U.S Treasury yields.

For the week ahead

It’s a quieter first half of the week. The markets will need to wait until Wednesday for prelim private sector PMI numbers from the U.S.

Expect the services PMI to have the greatest impact on yields.

On the monetary policy front FED Chair Powell testimony and FOMC member chatter will also influence.

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