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.
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 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.
The weekly average rates for new mortgages as of 9th May were quoted by Freddie Mac to be:
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.
For the week ending 3rd May, rates were quoted to be:
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,
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.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.