U.S Mortgage Rates Slide Back to 3-Year Lows

Mortgage rates hit reverse once more as market jitters over the economic outlook and expectations of a FED rate cut delivered for prospective buyers.
Bob Mason
Home For Sale Sign in Front of New House
Home For Sale Sign in Front of New House

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.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.