U.S Mortgage Rates Slide Back to 3-Year LowsMortgage rates hit reverse once more as market jitters over the economic outlook and expectations of a FED rate cut delivered for prospective buyers.
Mortgage rates hit reverse in the week ending 5th September. 30-year fixed rates fell by 9 basis points to 3.49% reversing a 3 basis point rise to 3.58% in the week prior.
The fall left 30-year rates at more than a 3-year low according to figures released by Freddie Mac.
Compared to this time last year, 30-year fixed rates were down by 105 basis points.
More significantly, 30-year fixed rates are down by 145 basis points since last November’s most recent peak of 4.94%.
Economic Data from the Week
Key stats through the first half of the week were on the heavier side in spite of the U.S markets being closed on Monday.
Private sector PMI figures for August and ADP nonfarm employment change numbers were in focus through to Thursday.
On Tuesday, the market’s preferred ISM Manufacturing PMI fell from 51.2 to 49.1 raising more red flags. A narrowing in the trade deficit on Wednesday had a muted impact on the Dollar and yields ahead of key stats on Thursday.
In August, nonfarm employment rose by 195k according to the ADP, coming in ahead of a forecasted 148k.
Also positive, was a jump in the ISM non-manufacturing PMI, which rose from 53.7 to 56.4 in August. A larger than expected rise in factory orders was also positive.
The positive numbers and geopolitics provided strong support to U.S Treasury yields over the week. News from HK, Italy and the UK eased demand for safe havens as did news of a planned resumption of trade talks between the U.S and China next month.
10-year Treasury yields ended the week up by 4.9 basis points, while 2-year yields rose by just 2 basis points.
In spite of the jump in yields, a contraction in the U.S manufacturing sector and general sentiment towards FED monetary policy led to the fall in mortgage rates.
Freddie Mac Rates
The weekly average rates for new mortgages as of 5th September were quoted by Freddie Mac to be:
- 30-year fixed rates decreased by 9 basis points to 3.49% in the week. Rates were down from 4.54% from a year ago. The average fee remained unchanged at 0.5 points.
- 15-year fixed rates also decreased by 6 basis points to 3.00% in the week. Rates were down from 3.99% from a year ago. The average fee rose from 0.5 points to 0.6 points.
- 5-year fixed rates fell by 1 basis point to 3.30% in the week. Rates were down by 63 basis points from last year’s 3.93%. The average fee held steady at 0.4 points.
According to Freddie Mac, prospective home buyers and refinancers continued to see rates in decline as a result of weak economic data. In spite of the impact of the U.S – China trade war on the manufacturing sector, labor market conditions remained solid.
For the housing sector, the unemployment rate remains low, housing affordability is improving and homebuyer demand is on the rise.
Mortgage Bankers’ Association Rates
For the week ending 30th August, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, held steady at 3.80%. Points decreased from 0.33 to 0.32 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances fell from 3.94% to 3.87%. Points decreased from 0.38 to 0.34 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances increased from 3.89% to 3.94%. Points declined from 0.26 to 0.24 (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 3,1% in the week ending 30th August. In the week ending 23rd August, the Market Composite Index had fallen by 6.2%.
The Refinance Index slid by 7% in the week ending 30th August, leaving the index up by 152% year-on-year. The Index tumbled by 8% in the week ending 23rd August.
The share of refinance mortgage activity decreased from 62.4% to 60.4%, following on from a fall from 62.7% to 62.4% in the week prior.
According to the MBA, ongoing trade tensions between the U.S and China led to a choppy market, resulting in a fall in Treasury yields. The slide in yields led the 30-year fixed mortgage rate to 3.87%, its lowest level since Nov-16.
The MBA also noted that, in spite of falling mortgage rates, refinances fell further. Purchase applications, however, rose by 1% in the week and were up by 5% year-on-year.
For the week ahead
It’s a relatively quiet first half of the week ahead.
Key stats due out of the U.S include July’s JOLT’s job openings due out on Monday and August wholesale inflation figures on Wednesday.
Disappointing nonfarm payroll figures on Friday pinned back treasury yields, though FED Chair Powell talked up the U.S economy to limit any material slide on the day.
Sentiment towards FED monetary policy, the U.S – China trade war and Brexit will continue to influence in the week.
As things stand, the markets are expecting a 25 basis point rate cut in just over a week, in spite of impressive service sector numbers. The sentiment towards monetary policy will likely pin mortgage rates back near-term.