U.S Mortgages – Down Again as Trade War Jitters Test Risk Sentiment

U.S mortgage rates were down again as the U.S and China prepared to resume talks on trade amidst the threat of a hike in tariffs.
Bob Mason
Upscale modern house for sale

Mortgage rates eased back further in the week ending 9th May. 30-year fixed rates fell by 4 basis points following on from a 6 basis point rise from the previous week. The 4 basis point fall took 30-year rates to 4.10% according to figures released by Freddie Mac.

Following the weekly fall, 30-year fixed rates stood 45 basis points below levels from 12-months ago.

More significantly, 30-year fixed rates have fallen by 84 basis points since last November’s most recent peak of 4.94%.

Economic Data from the Week

Economic data released out of the U.S through the first of the week was on the lighter side. Key stats included JOLTs job opening numbers for March.

The lack of stats left market risk appetite and demand for U.S Treasuries in the hands of the Oval Office.

Comments from U.S President Trump going into the week weighed on risks sentiment, with the threat and eventual hike of tariffs on $200bn of goods doing the damage.

From the previous week, a mixed set of labor market stats failed to offset the negative sentiment towards trade. Wages grew by just 0.2% in April, providing the FED with further reason to pause on rates near-term. A jump in nonfarm payrolls was positive, but without wage growth the impact on yields was limited.

Adding to the downside was weaker than expected service sector activity at the turn of the quarter. The ISM non-manufacturing PMI fell from 56.1 to 55.5.

There’s been plenty of debate over the U.S – China trade war. While the U.S economy may have been able to handle 10% tariffs, 25% tariffs may begin to bite if progress is not made in the coming weeks.

From outside of the U.S,

China’s economic data was mixed, leaving the markets on the more bearish side. While service sector activity picked up in April, China’s trade surplus narrowed substantially. A positive was an unexpected jump in imports, suggesting strong domestic demand. An unforeseen slide in exports didn’t help, however.

Freddie Mac Rates

The weekly average rates for new mortgages as of 9th May were quoted by Freddie Mac to be:

  • 30-year fixed rates fell by 4 basis points to 4.10% in the week. Rates were down from 4.55% from a year ago. The average fee held steady at 0.5 points.
  • 15-year fixed rates slipped by 3 basis points to 3.57% in the week. Rates were down from 4.01% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates declined by 5 basis points to 3.63% in the week. Rates decreased by 14 basis points from last year’s 3.77%. The average fee held steady at 0.4 points.

According to Freddie Mac, investor caution over current economic conditions and the ongoing U.S – China trade war weighed on Treasury yields.

Low mortgage rates, a strong labor market, and modest wage growth will provide further support to the real estate market.

Mortgage Bankers’ Association Rates

For the week ending 3rd May, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.39% to 4.44%. Points increased from 0.47 to 0.56 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.42% to 4.41%. Points increased from 0.46 to 0.47 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.31% to 4.27%. Points remained unchanged at 0.23 (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 2.7% in the week ending 3rd May. The increase partially reversed a 4.3% fall in the week ending 26th April.

The Refinance Index increased by 4% in the week ending 3rd May. The Index had fallen by 5% in the previous week ending 26th April.

The share of refinance mortgages declined from 38.8% to 37.9% following a fall from 39.4% to 38.8% in the week prior.

According to the MBA, it was a good week for the spring home-buying season. Purchase mortgage applications rose by 5%, supported by weekly and year-on-year increases. In spite of a slowdown in house price growth, home prices continue to rise, pressuring average loan sizes northwards.

The Mortgage Bankers Association also released its April Mortgage Credit Availability Report. According to the latest report,

  • Mortgage credit availability increased in April.
  • The MCAI (Mortgage Credit Availability Index) increased by 2.1% to 186.0 in April, reflecting a loosening in credit standards.

For the week ahead

It’s another relatively quiet start to the week. April retail sales, industrial production, and manufacturing sector numbers are due out of the U.S in the 1st half of the week.

The focus will be on the retail sales figures, though we can expect yields to slide should industrial production and manufacturing sector activity weaken.

Yields will likely remain under pressure at the start of the week, following April inflation figures released on Friday.

Chatter from Washington over the weekend won’t be too supportive of risk appetite, as Trump threatens China once more.

We can expect sentiment towards the extended trade war to continue to be the key driver in the week.

Outside of the U.S, China’s industrial production and retail sales figures due out on Wednesday will also be of influence in yields.

As things stand, mortgage rates could be in for another weekly fall, assuming the U.S and China fail to find common ground on trade.

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

IMPORTANT DISCLAIMERS
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.
RISK DISCLAIMER
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.
FOLLOW US