U.S Mortgage Rates Rally Supported by Housing Sector Data

Mortgage rates were on the rise last week, as housing sector data impressed. Even a FED rate cut failed to pin back the surge…
Bob Mason
Mortgage application loan agreement and house key

Mortgage rates were on the rise once more in the week ending 19th September. 30-year fixed rates surged by 17 basis points to 3.73%, following on from a 7 basis point rise in the week prior.

In spite of the rise, 30-year rates remained close to levels last seen in November 2016, according to figures released by Freddie Mac.

Compared to this time last year, 30-year fixed rates were down by 92 basis points.

More significantly, 30-year fixed rates are down by 121 basis points since last November’s most recent peak of 4.94%.

Economic Data from the Week

Through the first half of the week, the economic calendar was on the busier side. September Empire State Manufacturing Index figures and August industrial production numbers were mixed at the start of the week.

While the manufacturing index fell from 4.8 to 2.0, industrial production rose by 0.6% in August, coming in well ahead of a forecasted 0.2% rise.

The stats ultimately had a muted impact, however, with housing sector data on Wednesday and Thursday driving rates for the week.

On Wednesday, building permits and housing starts surged by 7.7% and by 12.3% respectively in August. On Thursday, existing home sales also impressed, with sales rising by 1.3%, following on from a 2.5% rise in July.

While the FED cut rates on Wednesday, FED Chair Powell remained positive towards the U.S economy, muting the rate cut impact on mortgage rates.

Freddie Mac Rates

The weekly average rates for new mortgages as of 19th September were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 17 basis points to 3.73% in the week. Rates were down from 4.65% from a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates also increased by 12 basis points to 3.21% in the week. Rates were down from 4.11% from a year ago. The average fee held steady at 0.5 points.
  • 5-year fixed rates rose by 13 basis point to 3.49% in the week. Rates were down by 43 basis points from last year’s 3.92%. The average fee rose from 0.3 points to 0.4 points.

According to Freddie Mac, downward pressure on mortgage rates drove demand and approvals for new construction.

Purchase applications were up by 15% year-on-year, with residential construction permits surging to the highest level in 12-years.

Strong labor market conditions and low mortgage rates continue to be the key drivers for the real estate market.

Mortgage Bankers’ Association Rates

For the week ending 13th September, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 3.76% to 3.89%. Points decreased from 0.31 to 0.30 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances rose from 3.82% to 4.01%. Points decreased from 0.44 to 0.37 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.84% to 4.01%. Points slipped from 0.34 to 0.29 (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 0.1% in the week ending 13th September. In the week ending 6th September, the Market Composite Index had risen by 2.0%.

The Refinance Index slid by 4% in the week ending 13th September, leaving the index up by 148% from the previous year. The Index had increased by 0.4% in the week ending 6th September.

The share of refinance mortgage activity decreased from 60% to 57.9%, following on from a fall from 60.4% to 60.0% in the week prior.

According to the MBA, a jump on U.S Treasury yields drove mortgage rates northwards to the levels not seen in 7-weeks.

The pickup in mortgage rates led to a pullback in refinancing activity in the week. By contrast, the purchase index increased for a 3rd consecutive week to hit its highest level since June of this year.

For the week ahead

It’s a busy week ahead on the economic data front.

Key stats include prelim September private sector PMI numbers due out on Monday and consumer confidence figures due out on Tuesday.

On Wednesday, new home sales will also influence mortgage rates ahead of finalized 2nd quarter GDP numbers and August pending home sales figures on Thursday.

From elsewhere, geopolitical risk will continue to be a key driver. Brexit and rising tension in the Middle East are in focus. The UN Security Council meeting will be of particular interest.

On the U.S – China trade war, negative chatter from Friday may also have an impact on yields.

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