U.S Mortgage Rates Rise Again. The Week Ahead is a little less Certain…

U.S mortgage rates were on the rise, as abating geopolitical risk and positive corporate earnings supported yields. It could be a choppy week ahead, however.
Bob Mason
Upscale modern house for sale

Mortgage rates were on the rise once more in the week ending 24th October. 30-year fixed rates rose by 6 basis points to 3.75%, following on from a 12 basis point rise in the week prior.

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

Compared to this time last year, 30-year fixed rates were down by 111 basis points.

More significantly, 30-year fixed rates are down by 119 basis points since last November’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the busier side in the week, with prelim October private sector PMIs, September durable goods and housing sector in focus.

A pickup in private sector activity in October was positive for risk sentiment in the week.

The Markit Services PMI rose from 50.90 to 51.0, with the Manufacturing PMI rising from 51.1 to 51.5.

While the Marikit numbers were vaguely positive, durable goods orders weighed. Core durable goods orders fell by 0.3% in September, with durable goods orders sliding by 1.1%.

Both sets of numbers were worse than economist forecasts.

On the housing front, things were not much better. Existing home sales slid by 2.2% in September, with new home sales falling by 0.7%.

The stats may have been mixed, but positive sentiment towards the U.S – China talks and the prospects of Britain avoiding a hard Brexit provided support for yields.

Freddie Mac Rates

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

  • 30-year fixed rates increased by 6 basis points to 3.75% in the week. Rates were down from 4.86% from a year ago. The average fee fell from 0.6 points to 0.5 points.
  • 15-year fixed rates rose by 3 basis points to 3.18% in the week. Rates were down from 4.19% from a year ago. The average fee held steady at 0.5 points.
  • 5-year fixed rates increased by 5 basis points to 3.40% in the week. Rates were down by 74 basis points from last year’s 4.14%. The average fee slipped from 0.4 points to 0.3 points.

According to Freddie Mac, uncertainty over the U.S – China trade war delivered volatility to the financial markets and bond markets in particular.

In the week, positive comments from both Washington and Beijing supported a pullback in demand for Treasuries. Uncertainty over Brexit, however, limited any major U.S Treasury sell-off.

Mortgage Bankers’ Association Rates

For the week ending 18th October, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 3.77% to 3.79%. Points decreased from 0.19 to 0.26 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances rose from 3.92% to 4.02%. Points increased from 0.35 to 0.38 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.90% to 3.96%. Points fell rose from 0.23 to 0.30 (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 11.9% in the week ending 18th October. In the week ending 11th October, the Market Composite Index had risen by 0.5%.

The Refinance Index slid by 17% in the week ending 18th October, leaving the index up by 126% from the previous year. The Index had risen by 4% in the week ending 11th October.

The share of refinance mortgage activity fell from 62.2% to 58.5%, reversing a rise from 60.4% to 62.2% in the week prior.

According to the MBA, interest rates continue to be volatile, with Brexit and ongoing trade negotiations driving the bond markets.

Mortgage rates rose to above 4% for the 1st time since September. Mortgage rates led to a sizeable slide in, both refinance and mortgage applications that remain sensitive to weekly fluctuations.

While applications were on the slide, volumes were still up by approximately 6% year-on-year.

For the week ahead

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

Key stats include October consumer confidence figures due out on Tuesday along with 3rd quarter GDP and October ADP nonfarm employment change figures due out on Wednesday.

The FED’s preferred Core PCE Price Index and personal spending figures, due out on Thursday, will also influence.

While we can expect less influence on yields, September pending home sales figures on Tuesday and personal spending figures on Thursday will also impact.

On the monetary policy front, expect the FED’s October policy decision on Wednesday to also influence.

From elsewhere, expect private sector PMI numbers out of China on Thursday and corporate earnings to also impact.

Let’s not forget about geopolitics… Brexit and chatter on trade will also influence.

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