U.S Mortgages – Rates and Applications Slide Again

Mortgage rates were down again, but that could be the end should trade talks progress and service sector PMI numbers out of the U.S impress.
Bob Mason
rates

Mortgage rates continued to fall in the week ending 3rd January 2019, with 30-year fixed rates falling to 4.51%, hitting levels not seen since 22nd August 2018.

The decline marked an 8th consecutive week of flat or weekly declines

With a shortened week due to the New Year holidays, economic data out of the U.S was on the lighter side, key stats limited to December manufacturing PMI numbers, the weekly initial jobless claims figures and December’s ADP nonfarm employment change numbers.

While the ADP employment change number impressed, manufacturing PMI numbers weighed on market risk sentiment through the week, the market’s preferred ISM Manufacturing PMI sliding from 59.3 to 54.1 in December, raising more alarm bells over the global economic outlook.

Adding downward pressure on Treasury yields was a particularly volatile holiday period in the global financial markets, with a flash crash on Thursday in the FX world seeing the Japanese Yen surge to ¥104 levels before easing back to ¥107 levels.

Weak economic data out of China also drove demand for U.S Treasuries, contributing to the fall in yields, China’s manufacturing PMI contracting in December as the effects of the U.S – China trade war became more apparent at the end of the 4th quarter.

In the U.S equity markets, the Dow was down 1.63% through to Thursday’s close, with the U.S government shut down providing little support.

With 2018 all wrapped up and what eventually became the worse year for the equity markets since 2008, the slide in mortgage rates and slowdown in house price growth, in some areas reversal, may not be enough to save a housing market in dire need of a boost following last year’s mortgage rate surge through to mid-November.

We can expect U.S Treasury yields to become all the more sensitive to economic data in the coming weeks, with housing sector data to also influence, any material slowdown in the housing sector likely to weigh heavily on the U.S economy.

Freddie Mac weekly average rates for new mortgages as of 3rd January were quoted to be:

  • 30-year fixed rate loan fell from 4.55% to 4.51% in the week, while up from 3.95% a year ago. The average fee held steady at 0.5 points.
  • 15-year fixed rates fell from 4.01% to 3.99% in the week, while up from 3.38% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates decreased from 4.00% to 3.98% in the week and up 0.53% from last year’s 3.45%. The average fee eased from 0.3 points to 0.2 points.

Mortgage Bankers’ Association Rates for the week ending 28th December were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.91% to 4.86%, with points decreasing from 0.57 to 0.54 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.86 to 4.84, with points decreasing from 0.47 to 0.42 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.59% to 4.72%, with points rising from 0.28 to 0.30 (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, slid by 9.8% over 2-weeks ending 27th December, following on from a 5.8% week-on-week slide in the week ending 14th December.

The Refinance Index fell by 12%, in the week ending 27th December, following on from a 2% week-on-week fall in the week ending 14th December.

The share of refinance mortgages decreased from 43.6% to 42.7%, week-on-week in the week ending 28th December, partially reversing the week of 14th’s increase from 41.5% to 43.5%.

According to the MBA, mortgage applications fell over the past 2-weeks, in spite of 30-year fixed rates continuing to fall, as investors continued to favour U.S Treasuries amid concerns over the U.S and global economic outlook and the extended U.S government shut-down.

For the week ahead, much will depend on the data through the week, following Friday’s labour market figures out of the U.S and FED Chair Powell’s relatively dovish stance on monetary policy. The Dow Jones rallied by more than 700 points to reverse the losses through Thursday, with 10-year Treasury yields seeing their largest single day gain since November 2016.

Positive economic data through the week coupled with a freshly dovish FED Chair could ultimately see mortgage rates take a step northwards for the first time since the week ending 31st October 2018, the last time that 30-year fixed rates rose.

Key stats through the week include December service sector PMI and November factory orders and November trade data, though risk sentiment and the direction of Treasury yields may ultimately be in the hands of trade talks between the U.S and China.

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