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U.S Mortgages – Rates Avoid a Rise for an 11th Consecutive Week

It’s not just the stats that will influence mortgage rates in the week ahead, with the FED, Brexit, Trade Talks and more in focus…
Bob Mason
mortgage rates

Mortgage rates held steady for a 2nd consecutive week, in the week ending 17th January 2019, with 30-year fixed rates holding at 4.45%, according to figures released by Freddie Mak.

The lack of an upward move marked an 11th consecutive week of flat or weekly declines.

Economic data released through the week was on the lighter side, with key stats including existing home sales, prelim January private sector PMI numbers and the weekly jobless claims figures.

While the private sector PMI numbers came in better than forecasted, service sector activity slowed at the start of the New Year, while the manufacturing sector saw a pickup. For the U.S economy, with service sector growth key, a marginally lower headline number supported those raising red flags over the economic outlook, though the numbers were not bad enough to send the U.S equity markets into a spin.

Outside of the U.S, GDP numbers out of China reflected softer growth, the numbers released ahead of the IMF’s downward revision to economic growth numbers for this year.

Away from the stats and growth forecasts, the ongoing U.S government shutdown was also a factor through the week, as was a particularly downbeat ECB president during the ECB press conference, which weighed on U.S Treasury yields on Thursday.

Freddie Mac weekly average rates for new mortgages as of 24th January were quoted to be:

  • 30-year fixed rate loan remained unchanged at 4.45% in the week, while up from 4.15% a year ago. The average fee remained unchanged at 0.4 points.
  • 15-year fixed rates remained unchanged at 3.88% in the week, while up from 3.62% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates increased from 3.87% to 3.90% in the week and up 0.38% from last year’s 3.52%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 18th January were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.76% to 4.82%, with points increasing from 0.52 to 0.62 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 4.74% to 4.75%, with points decreasing from 0.45 to 0.44 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.53% to 4.59%, with points decreasing from 0.31 to 0.25 (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, decreased by 2.7% in the week ending 18th January, following the previous week’s 13.5% surge.

The Refinance Index slipped by 5% in the week ending 18th January, partially reversing the previous week’s 19% surge.

The share of refinance mortgages decreased from 46.8% to 44.5%, week-on-week in the week ending 18th January, reversing the previous week’s increase from 45.8% to 46.8%.

According to the MBA, while applications eased back following 2 consecutive weeks of heavy increases, the purchase index remained close to the 9-year high struck in the week ending 11th January, with the refinance index sitting close to levels not seen since last spring.

For the figures released by the MBA, mortgage rates picked up across most loan types, the increases attributed to better than anticipated unemployment claims, easing trade tensions and upward momentum in the equity markets.

For the week ahead

Economic data is particularly heavy in the week ahead, with key stats scheduled for release including consumer confidence, nonfarm ADP employment change, the FED’s preferred Core PCE Price Index figures and, on the real estate front, pending home sales and house price figures.

While we will expect the stats to have an influence on the direction of Treasury yields and influence the FED early on in the week, Wednesday’s policy decision and rate statement, along with updates on trade talks between the U.S and China and sentiment towards Brexit will likely be the key drivers. Any risk aversion and mortgage rates could fall further back in the week ahead, in spite of the U.S President’s white flag moment on Friday, the government shutdown coming to an end.

Friday’s nonfarm payroll and wage growth figures will be released after the MBA’s numbers are released on Wednesday and the Freddie Mac numbers that are released on Thursday.

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