U.S Mortgage Rates – Trade Tariffs Send Mortgage Rates in ReverseMortgage rates were on the decline again as market risk aversion saw a spike in demand for U.S Treasuries pin back yields to give prospective home buyers much needed respite in June, though it could all change if China and the U.S shake hands.
Mortgage rates eased back through the week ending 21st June, with the rates appearing to have steadied in recent weeks, following a sharp upward move in the first half of the year, with mortgage rates now having eased in 3 of the last 4-weeks.
A spike in demand for the safe havens saw investors piling into U.S Treasuries, leading to a pullback in yields over fears of a full blown trade war between the U.S and China, with the EU and other nations being drawn in.
Housing sector data out of the U.S through the last week included May’s building permit and housing start numbers, along with existing home sales. While building permits slid by 4.6% in May, housing starts rose by 5%, suggesting some inventory support near-term, though rising costs of raw materials supports the continued fall in building permits that has added pressure on inventory numbers and mortgage application volumes alongside rising mortgage rates.
Data elsewhere that also had an influence on yields included June’s Philly FED Manufacturing PMI, which saw a material decline, with new export orders weighing, providing the markets with further evidence of a fall in global trade terms amidst the current trade spat.
Freddie Mac weekly average rates for new mortgages as of 21st June were quoted to be:
- 30-year fixed rate loan decreased from 4.62% to 4.57% in the week, while up from 3.90% a year ago.
- 15-year fixed rates fell from 4.07% to 4.04% last week, while up from 3.17% from a year ago.
- 5-year fixed rates held steady at 3.83% over the week, while up from last year’s 3.14%.
Mortgage Bankers’ Association Rates for the week ending 20th June were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA decreased from 4.83% to 4.82%.
- Average interest rate for 30-year fixed with conforming loan balances remained unchanged at 4.83%.
- Average 30-year rates for jumbo loan balances increased from 4.74% to 4.79%.
Weekly figures released by the Mortgage bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, jumped by 5.1%, following the previous week’s 1.5% fall week-on-week. The jump coming off the back of a downward trend over the last 4-weeks.
The Refinance Index surged by 6% in the week ending 15th June, more than reversing the previous week’s 2% fall, with the refinance share of mortgages rising from 35.6% to 36.8%, reversing the recent fall in the share of refinance mortgages.
Economic data through the week ahead is on the heavier side and will have some influence on market risk appetite, with key stats including June’s CB Consumer Confidence Index numbers on Tuesday, May durable goods orders, pending home sales and trade data on Wednesday, finalised 1st quarter GDP numbers on Thursday and then the FED’s preferred Core PCE Price Index and personal spending figures on Friday.
While solid numbers and an uptick in inflation would support a pickup in Treasury yields, trade war chatter will continue to be the focal point for the markets, with a continued retaliation by the U.S, the EU and China likely to lead to further spikes in demand for U.S Treasuries that would pin back mortgage rates further.
From the housing sector, May’s new home sales and pending home sales will be an area of interest in the wake of the upward trend in mortgage rates, as will FOMC member commentary, with members Bostic, Kaplan. Rosengren and Bullard scheduled to speak through the week, though how much influence will likely be determined by the level of noise from the Oval Office through the week.
For prospective home owners, the latest delinquency rates would be considered a positive, through rising borrowing costs and falling inventories continue to be a near-term risk for the broader housing sector, the bigger challenge being inventories as wage growth managed to find its feet through the current year, just in time for the pickup in mortgage rates.