U.S Mortgages – Down for a 2nd Week

Mortgage rates eased back in the week ending 16^th August, with mortgage rates on the decline amidst heightened market volatility and rising geo-political risk in recent weeks, according to figures released by Freddie Mac.

Freddie Mac also noted that, in spite of a steadying in mortgage rates through the summer, home sales have not increased, with purchase mortgage applications down year-on-year, the decline being attributed to a combination of rising house prices and limited inventories.

Relatively positive July U.S retail sales figures failed to spur 10-year Treasury yields into action, with elevated geo-political risk continuing to support demand for U.S Treasuries that has kept 10-year yields back at sub-2.9% levels in recent weeks.

Freddie Mac weekly average rates for new mortgages as of 16^th August were quoted to be:

• 30-year fixed rate loan decreased from 4.59% to 4.53% in the week, while up from 3.89% a year ago. The average fee remained unchanged at 0.5 points.
• 15-year fixed rates fell from 4.05% to 4.01% in the week, while up from 3.16% from a year ago. The average fee remained unchanged at 0.5 points.
• 5-year fixed rates decreased from 3.90% to 3.87% the week, while up from last year’s 3.16%. The average fee increased from 0.3 points to 0.4 points.

Mortgage Bankers’ Association Rates for the week ending 11^th August were quoted to be:

• Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.83% to 4.77%.
• Average interest rates for 30-year fixed with conforming loan balances fell from 4.84% to 4.81%.
• Average 30-year rates for jumbo loan balances decreased from 4.74% to 4.73%.

Weekly figures released by the Mortgage bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, fell by 2.0%, following on from the previous week’s 3.0% fall, week-on-week.

The Refinance Index remained unchanged in the week ending 11^th August, following the previous week’s 5% fall, with the share of refinance mortgages rising from 36.6% to 37.6%, reversing the previous week’s fall.

The MBA also released its 2^nd quarter 2018 mortgage delinquency report on Thursday:

• The delinquency rate for mortgage loans on 1-4 unit residential properties fell to a seasonally adjusted rate of 4.36% of all loans outstanding at the end of the 2^nd quarter of 2018.
• The delinquency rate was down by 27 basis points from the previous quarter, while up by 12 basis points from a year ago.
• The percentage of loans on which foreclosure actions were started fell by 4 basis points to 0.24%, its lowest level since the 2^nd quarter of 1987.
• The percentage of loans in the foreclosure process at the end of 2^nd quarter was 1.05%, down 11 basis points from 1^st quarter and 24 basis points from a year-ago, the lowest foreclosure inventory rate since 3^rd quarter of 2006.
• Delinquency rates (DR) were down across all stages of delinquency in the 2^nd The 30-day DR was down by 2 basis points, while the 60-day and 90-day DRs were down by 8 basis points and 18 basis points respectively.
• The serious delinquency rate, percentage of loans that are 90-days or more past due or in the process of foreclosure, was 2.3%, down by 31 basis points from the 1^st quarter and down by 19 basis points from a year ago.

The MBA attributed the reduced effects of the hurricanes from a year ago to the fall in delinquency rates, particularly for conventional loans, which were down 2 basis points from a year ago. In contrast, both FHA and VA loans saw rises in delinquency rates over 1-year, while down quarter-on-quarter.

• Non-seasonally adjusted overall mortgage delinquency rate in Texas fell by 26 basis points to 5.36%. The DR stood at 5.05% prior to the 2017 hurricane.
• In Florida, the DR fell by 139 basis points to 5.2%. The DR stood at 4.07% prior to the 2017 hurricane.

Economic growth and a strong labour market, with unemployment at 18-year lows, continued to support the currently low delinquency rates.

For the week ahead, key stats that will likely influence 10-year Treasury yields and ultimately mortgage rates, include existing home sales figures on Wednesday, which are scheduled for release ahead of the FOMC meeting minutes and new home sales and prelim private sector PMI numbers on Thursday.

Following some mixed data last week, weaker than expected private sector PMI numbers for August would certainly pin back Treasury yields to support the current pause in upward momentum in mortgage rates, though much will ultimately depend on the Oval Office and ongoing flare ups with Turkey, Iran, China and Russia.

Rising demand for U.S Treasuries have pinned back yields, easing upward pressure on mortgage rates in spite of the FED’s intent to proceed with its forecasted rate path for now.