U.S Mortgage Rates See Red for a 3rd Consecutive WeekU.S mortgage rates fell for a 3rd consecutive week. Rates fell in spite of better than expected economic data, with the coronavirus in focus.
Mortgage rates fell for a 3rd consecutive week in the week ending 6th February.
30-year fixed mortgage rates fell by 6 basis points to 3.45%. In the week ending 30th January, 30-year rates had fallen by 9 basis points to 3.51%.
The weekly decline left mortgage rates at the lowest level since 4th September 2019, when 30-year rates had stood at 3.49%. Historically, rates sit just 13 basis points above a low 3.32% back in November 2012, according to figures released by Freddie Mac.
Compared to this time last year, 30-year fixed rates were down by 96 basis points.
30-year fixed rates were also down by 149 basis points since November 2018’s most recent peak of 4.94%.
Economic Data from the Week
It was a busy week on the economic data front. Through the 1st half of the week, key stats included January private sector PMI figures on Monday and Wednesday.
Factory orders and ADP nonfarm employment change figures were also in focus on Tuesday and Wednesday.
The stats pointed towards a more positive economic outlook for the U.S, with a 291k jump in nonfarm a boon for the housing sector and consumer spending.
While the ISM Manufacturing PMI reported a return to expansion in January, service sector activity saw a quicker pace of growth. The ISM Non-Manufacturing PMI rose from 54.9 to 55.5.
A 1.8% rise in factory orders in December also supported risk appetite on Tuesday.
With the stats on positive in the week, support from the PBoC at the start of the week added to the jump in demand for riskier assets.
Mid-week, the Chinese government announced a cut in tariffs on U.S goods that also positive news.
Concerns over the likely effect of the coronavirus on near-term growth lingered, however.
Freddie Mac Rates
The weekly average rates for new mortgages as of 6th February were quoted by Freddie Mac to be:
- 30-year fixed rates decreased by 6 basis points to 3.45% in the week. Rates were down from 4.41% from a year ago. The average fee remained unchanged at 0.7 points.
- 15-year fixed rates fell by 3 basis points to 2.97% in the week. Rates were down from 3.84% compared with a year ago. The average fee also held steady at 0.7 points.
- 5-year fixed rates increased by 8 basis points to 3.32% in the week. Rates were down by 59 points from last year’s 3.91%. The average fee fell from 0.3 to 0.2 points.
According to Freddie Mac, the markets staged a rebound in the week, supported by increases in manufacturing and service sector activity. The combination of very low mortgage rates, a strong economy, and more positive financial market sentiment all point to an upbeat home purchase demand outlook.
Mortgage Bankers’ Association Rates
For the week ending 31st January, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.82% to 3.80. Points fell from 0.27 to 0.26 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances decreased from 3.81% to 3.71%. Points remained unchanged at 0.28 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances decreased from 3.78% to 3.70%. Points decreased from 0.20 to 0.19 (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 5.0% to the highest level since May 2013 in the week ending 31st January. In the week ending 24th January, the Index had increased by 7.2%.
The Refinance Index jumped by 15% from the previous week to the highest level since June 2013 and was 183% higher than the same week a year ago. The Index had risen by 8% in the week ending 24th January.
The refinance share of mortgage activity increased from 60.4% to 64.5% in the week ending 31st January. In the week prior, the refinance share of mortgage activity had decreased from 61.6% to 60.4%.
According to the MBA, 10-year Treasury yields slid by 20 basis points over the week. Market concern over a likely slowdown in the Chinse economy from the spread of the coronavirus drove demand for Treasuries.
30-year fixed rates fell for the 5th time in 6-weeks to 3.71%, its lowest level since October 2016.
The MBA added that the slide contributed to a jump in refinance activity, with the number of applications and average loan amount spiking. Increased demand for jumbo mortgages led to the spike in average loan amounts.
For the week ahead
It’s a quiet first half of the week, with December JOLTs job openings due out on Tuesday ahead of January inflation figures on Thursday.
From the week prior, U.S nonfarm payrolls and wage growth figures will likely deliver upward momentum.
While we can expect the stats to influence, the news wires will likely have a greater impact in the early part of the week.
Through the early part of the weekend, the number of coronavirus cases was reportedly up to 34,546. More alarmingly, however, was a rise in total deaths to 722, which surpassed the total number of SARS fatalities in HK & China back in 2003.
The continued spread and rise in the death toll have seen countries impose more restrictive travel restrictions. Such restrictions will inevitably impact trade within the region and beyond. For the global financial markets and the regional economies in Asia, the bigger question is duration.
While the primary focus will remain on the coronavirus, expect chatter from the Oval Office to also build.
With Trump acquitted last week, the U.S President will be looking to turn the page, which could put Iran or the EU in his sights once more.