U.S Mortgage Rates Steady ahead of the Tech Sector Sell-off…

Mortgage rates steadied in the week ending 3^rd September, following the previous week’s 8 basis point fall, delivering a 3^rd rise in 4-weeks.

30-year fixed rates rose by 2 basis points to 2.93%, partially reversing an 8 basis point fall to 2.91% in the week prior.

Compared to this time last year, 30-year fixed rates were down by 56 basis points.

30-year fixed rates were also down by 201 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

It was a busy 1^st half of the week on the economic data front.

Key stats included August’s private sector PMIs and ADP nonfarm employment change figures, together with the weekly jobless claims.

It was a mixed bag for the week, in spite of the uptick in mortgage rates.

Looking at the ISM private PMIs, manufacturing sector growth picked up in August, with the pace of job shedding easing.

By contrast, the all-important ISM Non-Manufacturing PMI fell from 58.1 to 56.9. While the decline was not an alarming one, it reflected a speed bump in the COVID-19 recovery nonetheless.

Looking at the labor market numbers, it was also a mixed bag ahead of Friday’s official labor market numbers.

According to the ADP, nonfarm employment rose by 428k in August, coming up short of a forecasted 950k rise. In July, 1,011k jobs had been added.

By contrast, the weekly jobless claims provided some comfort. In the week ending 28^th August, initial jobless claims stood at 881k. This was down considerably from the previous week’s 1,011k.

All in all, a jump in the U.S equity markets in the early part of the week to fresh record highs drove rates northwards.

Freddie Mac Rates

The weekly average rates for new mortgages as of 3^rd September were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 2 basis points to 2.93% in the week. Rates were down from 3.49% from a year ago. The average fee remained unchanged at 0.8 points.

• 15-year fixed rates fell by 4 basis points to 2.42% in the week. Rates were down from 3.00% compared with a year ago. The average fee increased from 0.7 points to 0.8 points.

• 5-year fixed rates increased by 2 basis points to 2.93% in the week. Rates were down by 37 points from last year’s 3.30%. The average fee remained unchanged at 0.2 points.

According to Freddie Mac,

• Mortgage rates have remained flat or at near-record lows for the last month.
• However, there are some interesting compositional shifts as the 10-year Treasury rate increased modestly, while mortgage rates declined.
• Spreads may decline even further. The rise in Treasury rates will make it difficult for mortgage rates to fall much more over the next few weeks, however.

Mortgage Bankers’ Association Rates

For the week ending 28^th August, rates were quoted to be:

• Average interest rates for 30-year fixed, backed by the FHA, increased from 3.16% to 3.19%. Points increased from 0.29 to 0.34 (incl. origination fee) for 80% LTV loans.
• Average interest rates for 30-year fixed with conforming loan balances decreased from 3.11% to 3.08%. Points fell from 0.38 to 0.36 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances remained unchanged for a 2^nd week at 3.41. Points increased from 0.35 to 0.38 (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 2% in the week ending 28^th August. In the week prior, the index had fallen by 6.5%.

The Refinance Index fell by 3% from the previous week and was 40% higher than the same week a year ago. In the week prior, the index had slid by 10%.

The refinance share of mortgage activity decreased from 62.6% to 62.5% in the week ending 28^th August. In the week prior, the share had declined from 64.6% to 62.6%.

According to the MBA,

• Both conventional and government refinancing activity decreased last week. This was despite 30-year fixed and 15-year fixed mortgage rates falling to near historical lows.
• Mortgage rates have remained below 3.5% for 5-months now, and it’s possible that refinance demand is slowing. There may not be another significant rise in demand without another material fall in mortgage rates.
• Purchase applications were unchanged over the week and were 28% higher than a year ago. It was the 15^th straight week of year-over-year increases.
• Lenders are reporting that strong demand for home buying is coming from a delayed activity from the spring. Households are also reportedly seeking more space in less densely populated areas.

For the week ahead

It’s a relatively quiet 1^st half of the week on the U.S economic calendar.

Key stats include August’s inflation and the JOLTs job opening numbers along with the weekly jobless claims figures.

With the U.S on holiday on Monday, expect any chatter from Washington to also influence.

Away from the U.S, trade data from China will also provide rates with direction in the week…