U.S Mortgage Rates Hit Reverse as the Coronavirus Spreads

Mortgage rates hit reverse in the week ending 23^rd January, falling by 5 basis points to 3.60%. In the week ending 16^th January, mortgage rates had risen by 1 basis point to 3.65%.

The weekly decline left mortgage rates at the lowest level in 3-months and about a quarter-point above all-time lows, according to figures released by Freddie Mac.

Compared to this time last year, 30-year fixed rates were down by 85 basis points.

30-year fixed rates are also down by 134 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the lighter side in the first half of the week. Key stats were limited to December’s existing-home sales figures on Wednesday and the weekly jobless claims figures on Thursday.

In a shortened week, the numbers had a muted impact on yields as the markets reacted to the global spread of the coronavirus.

Demand for U.S Treasuries rose in the week as the U.S equity markets fell back from record highs. In contrast to the SARS and MERS strains, the latest strain has already made a global presence.

Cases have been reported beyond China’s borders despite the government’s best efforts to contain the virus.

Perhaps most alarming is the fact that some carriers can be asymptomatic while able to pass on the virus…

Freddie Mac Rates

The weekly average rates for new mortgages as of 23rd January were quoted by Freddie Mac to be:

• 30-year fixed rates decreased by 5 basis points to 3.60% in the week. Rates were down from 4.45% from a year ago. The average increased from 0.7 points to 0.8 points.

• 15-year fixed rates fell by 5 basis points to 3.04 in the week. Rates were down from 3.88% from a year ago. The average increased from 0.7 points to 0.8 points.

• 5-year fixed rates slid by 11 basis points to 3.28% in the week. Rates were down by 62 points from last year’s 3.90%. The average fee held steady at 0.3 points.

According to Freddie Mac, the very low-interest-rate environment has clearly had an impact on the housing market. Both new construction and home sales have surged in response to falling rates, the rebound in the economy and improving financial market sentiment.

Mortgage Bankers’ Association Rates

For the week ending 17^th January, rates were quoted to be:

• Average interest rates for 30-year fixed, backed by the FHA, remained unchanged at 3.78%, the lowest level since Oct-19. Points fell from 0.30 to 0.25 (incl. origination fee) for 80% LTV loans.
• Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 3.87, the lowest level since Sep-19. Points decreased from 0.32 to 0.27 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 3.83% to 3.87%. Points decreased from 0.24 to 0.21 (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, fell by 1.2% in the week ending 17^th January. The Composite Index had surged by 30.2% in the week ending 10^th January.

The Refinance Index decreased by 2% from the previous week and was 116% higher from the same week a year ago. In the week ending 10^th January, the Index had surged by 43% from the prior week.

The refinance share of mortgage activity decreased from 62.9% to 61.6% in the week. In the week prior, the refinance share of mortgage activity had increased from 58.9% to 62.9%.

According to the MBA, the mortgage applications fell following 2-weeks of solid increases. In spite of the weekly decline, however, the total pace of applications remained at an elevated level.

Purchases had a strong start to the year, up by 8% from the same week a year ago. Refinance applications remained near the highest level since October-2019.

Through the week, investor demand for U.S Treasuries pinned back mortgage rates. The demand for Treasuries continued in spite of the U.S and China signing the phase 1 trade agreement and positive retail sales figures

For the week ahead

It’s a particularly busy week ahead. Key stats include December durable goods orders and January consumer confidence figures due out on Tuesday.

On Wednesday, stats include trade data ahead of the FED’s first monetary policy decision of the year on Wednesday evening.

The focus will then shift to 4^th quarter GDP numbers on Thursday.

From the housing sector, December’s new home and pending home sales are also due out in the week.

We can expect plenty of influence from the stats and the FED.

Outside of the numbers, expect the news wires to also influence as news of the spread of the coronavirus will likely continue to hit the wires.