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Bob Mason
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Mortgage rates fell to an all-time record low in the week ending 2nd July. The weekly decline came off the back of a hold in the previous week.

30-Year fixed rates fell by 6 basis points to an all-time low 3.07%. In the previous week, 30-year fixed rates had held steady at 3.13%.

Compared to this time last year, 30-year fixed rates were down by 68 basis points.

30-year fixed rates were also down by 187 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the busier side through the 1st half of the week.

Key stats included consumer confidence, labor market, and private sector PMI figures for June.

Both the ADP and official government figures reported a sizeable jump in nonfarm payrolls in June. The official government figures revealed a record 4.8m increase in nonfarm payrolls, following 2.699m in May.

As a result of the jump in nonfarm payrolls, the U.S unemployment rate fell from 13.3% to 11.1%.

Consumer confidence was also on the rise, with the CB Consumer Confidence Index up from 85.9 to 98.1.

From the private sector, the numbers were also positive. The Chicago PMI rose from 32.1 to 42.1, with the IMS Manufacturing PMI increasing from 43.1 to 52.6.

The only negative from the week was another 1.427m rise in the weekly jobless claims.

While the stats were skewed to the positive, a continued rise in new COVID-19 cases raised more red flags. In recent weeks, a number of U.S states have hit pause on reopening. This could ultimately slow the pace of hiring and economic recovery.

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Freddie Mac Rates

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

  • 30-year fixed rates fell by 6 basis points to 3.07% in the week. Rates were down from 3.75% from a year ago. The average fee also remained unchanged at 0.8 points.
  • 15-year fixed decreased by 3 basis points to 2.56% in the week. Rates were down from 3.18% compared with a year ago. The average fee remained unchanged at 0.8 points.
  • 5-year fixed rates slid by 8 basis points to 3.00% in the week. Rates were down by 45 points from last year’s 3.45%. The average fee decreased from 0.5 points to 0.3 points.

According to Freddie Mac:

  • Mortgage rates continued to move downwards, raising the possibility of sub-3% later in the year.
  • Economic data from the week suggested that economic activity has paused in the last couple of weeks.
  • This was reportedly reflected in consumer spending and purchase activity.

Mortgage Bankers’ Association Rates

For the week ending 26th June, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 3.35 to 3.43%. Points increased from 0.22 to 0.36 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances declined from 3.30% to 3.29%. Points rose from 0.32 to 0.36 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.62% to 3.59. Points increased from 0.29 to 0.31 (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, declined by 1.8% in the week ending 26th June. In the week prior, the Index had fallen by 8.7%.

The Refinance Index decreased by 2% and was up by 74% from the same week a year ago. The Index had slid by 12% in the previous week.

The refinance share of mortgage activity fell from 61.3% to 61.2% of total applications in the week ending 26th June. In the week prior, the share had decreased from 63.2% to 61.3% of total applications.

According to the MBA:

  • Mortgage applications fell last week despite mortgage rates hitting another record low.
  • Investors contemplated the risks of the recent resurgence of COVID-19 cases to the labor market and economy.
  • Following 2-months of strong growth, purchase applications declined for a 2nd consecutive week.
  • The decline is potentially a signal that pent-up demand is beginning to wane, with low housing supply limiting buyer options.
  • Tighter inventories look to be leading to fast price growth, reflected by a record-high increase in the average purchase application loan size.

For the week ahead

It’s another relatively quiet 1st half of the week for the Greenback.

Key stats from the U.S include the market’s preferred ISM Non-Manufacturing PMI for June and the weekly jobless claims.

Expect both sets of figures to garner plenty of attention, with May’s JOLTs job openings also likely to draw attention.

Outside of the numbers, however, COVID-19 and geopolitics will continue to influence market risk sentiment.

The markets will be looking for further progress towards a COVID-19 vaccine and for Trump to hold back on tariffs… There’s also the rising tension between the U.S and China to consider.

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