U.S Mortgage Rates Were on the Rise, with More Likely to ComeMortgage rates were on the rise last week. With geopolitical risk abating late in the week, more gains could be on the cards…
Mortgage rates resumed an upward trend in the week ending 12th December. 30-year fixed rates rose by 5 basis points to 3.73%. In the week ending 5th December, mortgage rates had remained flat at 3.68%.
While up by 5 basis points in the week, 30-year rates continued to hold close to levels last seen in early November of 2016, according to figures released by Freddie Mac.
Compared to this time last year, 30-year fixed rates were down by 90 basis points.
30-year fixed rates are also down by 121 basis points since November 2018’s most recent peak of 4.94%.
Economic Data from the Week
It was a relatively quiet week on the U.S economic calendar through the first half of the week.
Key stats included finalized 3rd quarter nonfarm productivity and unit labor cost figures and November inflation numbers.
While the annual rate of core inflation held steady at 2.3%, consumer prices rose by 0.3% in November, following a 0.4% rise in October.
The stats had a muted impact, however, with updates from Beijing and Washington on trade and the FED in focus.
On the monetary policy front
The FED delivered a more dovish outlook on rates, projecting to hold steady through 2020. While this would be negative for U.S Treasury yields, it was bullish when coupled with a positive outlook on economic growth.
On the U.S – China trade war front
After negative comments, sentiment improved mid-week, ahead of the announcement of a phase 1 agreement, also supporting yields.
Freddie Mac Rates
The weekly average rates for new mortgages as of 12th December were quoted by Freddie Mac to be:
- 30-year fixed rates rose by 5 basis points to 3.73% in the week. Rates were down from 4.63% from a year ago. The average fee rose from 0.5 points to 0.7 points.
- 15-year fixed rates increased from 3.14% to 3.19% in the week. Rates were down from 4.07% from a year ago. The average fee rose from 0.4 points to 0.7 points.
- 5-year fixed rates decreased by a further 3 basis points to 3.36% in the week. Rates were down by 68 basis points from last year’s 4.04%. The average fee held steady at 0.4 points.
According to Freddie Mac, with the FED in cruise control and the economy continuing to grow at a steady pace, mortgage rates stabilized.
Downside risks to the U.S economy abated, with strong labor market conditions supportive of a higher interest rate environment.
Freddie Mac noted that, since early September, mortgage rates have recovered from a year low 3.49% in September.
In spite of the uptick, mortgage demand remained resilience, with economic sentiment limiting the impact of rising rates.
Mortgage Bankers’ Association Rates
For the week ending 6th December, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.83% to 3.79%. Points fell from 0.31 to 0.27 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances increased from 3.97% to 3.98%. Points increased from 0.32 to 0.33 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances decreased from 3.91% to 3.90%. Points increased from 0.26 to 0.27 (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 3.8% in the week ending 6th December. Loan applications had tumbled by 9.2% in the week ending 29th November.
The Refinance Index rose by 9%, partially reversing a 16% in the week ending 6th December and was 146% higher from the same week a year earlier.
The share of refinance mortgage activity increased from 59.0% to 62.4%, reversing a fall from 62.0% to 59.0% in the week prior.
In the week, the MBA noted that the low mortgage rate trend continued through 2019, with mortgage applications sensitive to the numbers.
The MBA also noted that the November NFP numbers should support further upside for applications in the months ahead.
For the week ahead
It’s a busy first half of the week on the economic data front.
Key stats December’s prelim private sector PMI and NY Empire State Manufacturing Index figures are due out on Monday.
On Tuesday, November industrial production and October JOLT’s job openings will also be in focus.
From the housing sector November building permits and housing stats, due out on Tuesday, will also garner plenty of attention. Consumer confidence and labor market conditions, coupled with low mortgage rates should translate into a strong demand for housing.
While we can expect some sensitivity to the private sector PMIs, the hope of improved economic conditions in the wake of the phase 1 trade agreement, could limit the effect of any weak numbers.
From elsewhere, expect China’s industrial production figures and PMI numbers from the Eurozone to also influence risk appetite on Monday.
On the Geopolitical front,
Trump’s impeachment may drive some demand for Treasuries, though few expect a conviction, which should limit any major inflows.
From last week, the news of a phase 1 agreement between the U.S and China should provide some upward pressure on mortgage rates.