U.S Mortgages – Rates Drop Further, While Applications rebound

Mortgage rates slide and applications surge, easing near-term concerns over the housing sector, with labour market conditions still a positive.
Bob Mason
Sold Home For Sale Sign and New House

Mortgage rates continued to fall in the week ending 10th January 2019, with 30-year fixed rates falling to 4.45%, hitting levels not seen since mid-April 2018.

The decline marked a 9th consecutive week of flat or weekly declines.

Following some particularly impressive labour market data released in the week ending 4th January, a shift in forward guidance by FED Chair Powell and other FOMC members pinned back any surge in U.S Treasury yields, with some disappointing economic data released through the last week also weighing.

Economic data was on the lighter side through the week, with key stats limited to December’s ISM non-manufacturing PMI that came in softer than expected on Monday.

Outside of the numbers, the FOMC meeting minutes released on Wednesday also struck a dovish tone, aligned with FOMC members speaking through the week, with the ongoing government shutdown contributing to a pullback in yields through the week.

On the trade front, while U.S – China trade negotiations concluded on Wednesday, with both sides giving positive updates, while the lack of concrete timelines added further pressure on yields, supporting the pullback in mortgage rates through the week.

Freddie Mac weekly average rates for new mortgages as of 10th January were quoted to be:

  • 30-year fixed rate loan fell from 4.51% to 4.45% in the week, while up from 3.99% a year ago. The average fee held steady at 0.5 points.
  • 15-year fixed rates fell from 3.99% to 3.89% in the week, while up from 3.44% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates decreased from 3.98% to 3.83% in the week and up 0.37% from last year’s 3.46%. The average fee rose from 0.2 points to 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 4th January were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.86% to 4.70%, the lowest level since Apr-18, with points decreasing from 0.54 to 0.47 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.84 to 4.74, the lowest level since Apr-18, with points increasing from 0.42 to 0.47 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.72% to 4.52%, the lowest level since Feb-18, with points easing from 0.30 to 0.28 (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 23.5% in the week ending 4th January, reversing a 9.8% slide over the previous 2-weeks.

The Refinance Index surged by 35% in the weekend ending 4th January, reversing a 12% fall from the week ending 27th December 2018.

The share of refinance mortgages increased from 42.7% to 45.8%, week-on-week in the week ending 4th January, reversing the week of 27h’s decrease from 43.6% to 42.7% to hit the highest level since Feb-18.

According to the MBA, mortgage applications were up 4% from the previous year, the rebound in applications being driven by falling rates and a spike in refinance activity, with the refinance index hitting its highest level since Jul-18.

The MBA released its credit availability figures for December:

  • The Mortgage Credit Availability Index (MCAI) decreased by 7.3% to 175.0 in December, reflecting tighter lending standards.
  • The Conventional MCAI fell by 14.5%, weighed by declines in the Jumbo MCAI (-14.9%) and Conventional MCAI (-14.0%), while the Government MCAI increased by 0.1%.
  • The support of credit was at its lowest since Feb-17, attributed to the expiration of the Home Affordable Refinance Program (HARP).

The MBA also released its 3rd quarter 2018 commercial / multifamily databook:


  • Commercial property sales volume was 11% higher during the first 3-quarters of 2018, compared with the same period in 2017.
  • Sales of individual properties increased by 8%, with the sales of apartments and industrial rising by 12% and by 17% respectively.


  • Borrowing and lending backed by commercial and multifamily properties fell by 3% in the 3rd quarter and by 7% year-on-year in the 3rd.
  • The decline was attributed to rising rates, with 10-year Treasury yields rising from 2.87% to 3.05% through the quarter.
  • While CMBS and bank lending markets struggled, lending backed by multifamily properties and for government sponsored enterprises (GSEs) continued to grow.

Mortgage Debt Outstanding:

  • The level of commercial / multifamily mortgage debt outstanding rose by $45.4bn (1.4%) to an all-time high in the 3rd
  • Multifamily mortgage debt increased by $26.1bn (2%) to $1.3tn, driving total commercial / multifamily debt outstanding to $3.32tn.

For the week ahead

A relatively busy week on the economic calendar will provide direction for U.S Treasuries and mortgage rates, with wholesale inflation numbers, retail sales figures, manufacturing PMI numbers and December housing sector figures due out through to Thursday.

Some further easing in mortgage rates may come at a push however should further progress be made on trade and the government shutdown come to an end.

Last Friday’s inflation numbers also revealed a first fall in consumer prices in 9-months that, coupled with a more dovish FED, will likely limit the upside for mortgage rates in the week ahead.

It will ultimately boil down to Oval Office chatter and any progress on Capitol Hill, the downward trend in mortgage rates since November as impressive as the rise in rates through the first 3-quarters of the year.

With housing sector numbers due out this week, December’s labor market figures and the continued reversal in mortgage rates should ease some pressure on the housing market, though lingering concerns over the economic outlook may ultimately peg back any marked improvement in sector conditions near-term.

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