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Bob Mason
Mortgage application loan agreement and house key

Mortgage rates fell further back in the week ending 30th January. 30-year rates fell by 9 basis points to 3.51%. In the week ending 23rd January, 30-year rates had fallen by 5 basis points to 3.60%.

The weekly decline left mortgage rates at the lowest level since early September and less than a quarter-point above all-time lows, according to figures released by Freddie Mac.

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Compared to this time last year, 30-year fixed rates were down by 95 basis points.

30-year fixed rates were also down by 143 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

It was a relatively busy week on the economic data front. Key stats included durable goods orders and consumer confidence figures.

A jump in the CB Consumer Confidence Index from 128.2 to 131.6, coupled with a 2.4% rise in durable goods orders, supported yields,

On the negative, however, was a 0.10% fall in core durable goods orders and a widening in the goods trade deficit from $62.99bn to $68.33bn.

Housing sector figures were also disappointing at the end of the year. New home sales fell by 0.4%, with pending home sales sliding by 4.9% in December.

It wasn’t all doom and gloom, however, with house prices on the rise. In November, the S&P/CS HPI Composite – 20 (n.s.a) rose by 2.6% year-on-year. In October, the index had risen by 2.2%.

While the stats provided direction, the FED and market sentiment towards the coronavirus led to an inversion of the 3-month – 10-year yield curve on Wednesday.

FED Chair Powell raised concern over the likely impact of the coronavirus on the global economy. Powell also raised concerns over inflation, which left the door ajar to a rate cut in the coming months.

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Freddie Mac Rates

The weekly average rates for new mortgages as of 30th January were quoted by Freddie Mac to be:

  • 30-year fixed rates decreased by 9 basis points to 3.51% in the week. Rates were down from 4.46% from a year ago. The average fell back from 0.8 points to 0.7 points.
  • 15-year fixed rates fell by 4 basis points to 3.00% in the week. Rates were down from 3.89% compared with a year ago. The average decreased from 0.8 points to 0.7 points.
  • 5-year fixed rates declined by 4 basis points to 3.24% in the week. Rates were down by 72 points from last year’s 3.96%. The average fee held steady at 0.3 points.

According to Freddie Mac, mortgage rates fell to their 2nd lowest level in 3-years, driving demand for home buyers and refinancers.

The downside in mortgage rates should see homeowners loosen the purse strings to spend more in the retail sector.

Mortgage Bankers’ Association Rates

For the week ending 24th January, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 3.78% to 3.82. Points rose from 0.25 to 0.27 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 3.87% to 3.81%. Points increased from 0.27 to 0.28 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.87% to 3.78%. Points decreased from 0.21 to 0.20 (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 7.2% in the week ending 24th January. The Composite Index had fallen by 1.2% in the week ending 17th January.

The Refinance Index increased by 8% from the previous week and was 146% higher than the same week a year ago. The Index had fallen by 2% in the week ending 17th January.

The refinance share of mortgage activity decreased from 61.6% to 60.4% in the week. In the week prior, the refinance share of mortgage activity had fallen from 62.9% to 61.6%.

According to the MBA, mortgage applications continued to rise as borrowers responded to last week’s fall in mortgage rates.

Jitters over the coronavirus and impact on the global economy weighed on Treasury yields in the week, supporting the fall in rates.

The MBA added that, with mortgage rates at their lowest level since November 2016, demand for refinancing mortgages surged.

Purchase applications were 17% higher than the same week a year ago, with low rates and a strong labor market supporting demand.

For the week ahead

It’s another particularly busy week ahead. Key stats include the ISM’s manufacturing and non-manufacturing PMIs due out on Monday and Wednesday.

Factory orders and the ADP nonfarm employment change figures on Tuesday and Wednesday will also influence.

While the stats will provide direction, expect updates on the spread of the coronavirus to overshadow any positive numbers in the week.

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