U.S Mortgage Rates Return to Above 3% for the First Time since April

Mortgage rates rose for the 4^th time in 9-weeks in the week ending 24^th June.

Reversing a 3 basis points decline from the previous week, 30-year fixed rates increased by 9 basis points to 3.02%.

Since 21^st April, 30-year mortgage rates had failed to move above the 3% mark before the latest increase.

Compared to this time last year, 30-year fixed rates were down by 11 basis points.

30-year fixed rates were still down by 192 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

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

Housing sector data was in focus on Tuesday ahead of prelim private sector PMI figures for June on Wednesday.

The stats were skewed to the negative in the week but not enough to peg back mortgage rates.

Existing home sales fell by 0.9% in May, following on from a 2.7% slide in April. While negative, tight inventories likely contributed to the decline.

More significantly in the week, however, was slower service sector growth in June.

The services PMI fell from 70.4 to 64.8, while the manufacturing PMI rose from 62.1 to 62.6. As a result of the slide in the services PMI, the composite PMI fell from 68.7 to 63.9.

While the stats were skewed to the negative, market reaction to the previous week’s FOMC projections supported the pickup in mortgage rates.

Freddie Mac Rates

The weekly average rates for new mortgages as of 24^th June were quoted by Freddie Mac to be:

• 30-year fixed rates rose by 9 basis points to 3.02% in the week. This time last year, rates had stood at 3.13%. The average fee remained unchanged at 0.7 points.

• 15-year fixed rose by 10 basis points to 2.34% in the week. Rates were down by 25 basis points from 2.59% a year ago. The average fee rose from 0.6 points to 0.7 points.

• 5-year fixed rates increased by 1 basis point to 2.53%. Rates were down by 55 points from 3.08% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

• Mortgage rates have risen above 3% for the first time in 10-weeks.
• As the economy progresses and inflation remains elevated, rates will likely continue to gradually rise over the remainder of the year.
• For those homeowners who have not yet refinanced, and there remain many borrowers who could benefit from doing so – now is the time.

Mortgage Bankers’ Association Rates

For the week ending 18^th June, the rates were:

• Average interest rates for 30-year fixed to conforming loan balances increased from 3.11% to 3.18%. Points increased from 0.36 to 0.48 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 3.14% to 3.21%. Points rose from 0.33 to 0.34 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 3.20% to 3.26%. Points decreased from 0.46 to 0.44 (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 2.1% in the week ending 18^th June. In the week prior, the Index had risen by 4.2%.

The Refinance Index rose 3% and was 9% lower than the same week a year ago. The Index had risen by 6% in the previous week.

In the week ending 18^th June, the refinance share of mortgage activity increased from 61.7% to 62.5%. The share had risen from 60.4% to 61.7% in the previous week.

According to the MBA,

• Mortgage rates increased to their highest level in a month.
• Despite the rise, refinances increased for a second consecutive week.
• Purchase applications have regained an upward trend over the past few weeks.
• Activity was slightly higher for the 3^rd straight week but remained lower than the same week a year ago.

For the week ahead

It’s a busier first half of the week. Consumer confidence figures for June will be in focus ahead of ADP nonfarm employment change figures on Wednesday.

Expect both sets of numbers to provide yields and, ultimately, mortgage rates with direction.

On the monetary policy front, FOMC member chatter will also influence in the early part of the week.

From elsewhere, private sector PMI figures from China will also provide riskier assets and yields with direction in the week.