U.S Mortgage Rates Held Steady ahead of Nonfarm Payrolls

Mortgage rates were unchanged, with 30-year fixed rates holding steady after having risen for just the 3^rd time in 9-weeks in the week prior.

In the week ending 2^nd September, 30-year fixed rates remained unchanged at 2.87%. Mortgage rates had risen by 1 basis point in the week prior.

30-year mortgage rates have risen just once beyond the 3% mark Since 21^st April.

Compared to this time last year, 30-year fixed rates were down by 6 basis points.

30-year fixed rates were still down by 207 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

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

Consumer confidence, manufacturing PMIs, and ADP nonfarm employment change were in focus.

The stats were skewed to the negative, with consumer confidence taking a hit in August.

Manufacturing sector activity picked up slightly in August, however, with the ISM Manufacturing PMI up from 59.5 to 59.9.

While the ISM figure was market positive, labor market data disappointed ahead of the all-important NFP numbers on Friday.

According to the ADP, nonfarm employment increased by 374k in August, falling short of a forecasted 613k jump.

From China, economic data was also skewed to the negative, raising red flags over the pace of the economic recovery.

According to the market’s preferred Markit survey, China’s Caixin Manufacturing PMI fell from 50.3 to 49.2.

Freddie Mac Rates

The weekly average rates for new mortgages as of 2^nd September were quoted by Freddie Mac to be:

• 30-year fixed rates held steady 2.87% in the week. This time last year, rates had stood at 2.93%. The average fee remained unchanged at 0.6 points.

• 15-year fixed increased by 1 basis point 2.18% in the week. Rates were down by 24 basis points from 2.42% a year ago. The average fee remained unchanged at 0.6 points.

• 5-year fixed rates rose by 1 basis point to 2.43%. Rates were down by 50 points from 2.93% a year ago. The average fee rose from 0.2 points to 0.3 points.

According to Freddie Mac,

• Economic growth and the acceleration in inflation have moderated in the last month, giving the markets comfort. As a result, mortgage rates have also stabilized.
• Heading into the fall, home purchase demand is stable and home sales remain firm and above pre-pandemic levels.
• Inventory of unsold homes remain tight but improving modestly.
• Current sector dynamics will allow for home price pressure to ease over the remainder of the year.

Mortgage Bankers’ Association Rates

For the week ending 27^th August, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 3.03%. Points increased from 0.29 to 0.34 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA fell from 3.10% to 3.09%. Points declined from 0.29 to 0.25 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances remained unchanged at 3.13%. Points remained unchanged at 0.26 (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 2.4% in the week ending 27^th August. In the previous week, the index had increased by 1.6%.

The Refinance Index decreased by 4% and was 2% higher than the same week a year ago. The Index had increased by 10% in the previous week.

In the week ending 27^th August, the refinance share of mortgage activity fell from 67.3% to 66.8%. The share had remained unchanged at 67.3% in the week prior.

According to the MBA,

• There was little change in mortgage rates last week.
• Despite low rates, refinance applications declined, as some borrowers looked for rates to drop further.
• Recent uncertainty around the economy and the pandemic have pegged rates back.
• Even with a slight increase, purchase activity hit its highest level since early July.
• Home purchase activity continues to be dominated by higher price tiers of the market.
• In the week, the purchase average loan size hit $396,500, the highest average in 5-weeks.

For the week ahead

It’s a quieter week ahead on the economic data front, with the U.S markets closed for Labor Day on Monday.

Economic data in the 1^st half of the week is limited to JOLT’s job openings. Following last week’s nonfarm payroll figures and a lack of stats, yields could peg mortgage rates back in the week.