U.S Mortgages – Rates Hold Steady, as Applications Surge

Mortgage rates hit pause in the week, while mortgage rates soared. Strong labor market conditions and a more dovish FED have helped.
Bob Mason
Upscale modern house for sale

Mortgage rates stabilized in the week ending 4th March. 30-year fixed rates rose by 2 basis points following the 22 basis slide in the previous week. The 2 basis point rise took 30-year rates to 4.08% according to figures released by Freddie Mac.

Following the weekly uptick, 30-year fixed rates stood 32 basis points below levels from 12-months ago.

More significantly, 30-year fixed rates have fallen by 86 basis points since last November’s most recent peak of 4.94%.

The FED may have put the brakes on lifting rates through the year as a result of softer growth, but mortgage applications are soaring.

Strong labor market conditions, falling house prices, and sliding mortgage rates could be a better combination for prospective home buyers.

Economic Data from the Week

Economic data released through the last week included retail sales, private sector PMI, durable goods orders and ADP nonfarm employment change figures.

While retail sales and the market’s preferred ISM non-manufacturing PMI were negatives, support for risk appetite came from progress on trade talks between the U.S and China. Adding to the pickup in risk appetite was a return to growth in China’s manufacturing sector.

The markets were largely able to brush aside a negatively skewed set of stats ahead of Thursday’s mortgage rate release. Hopes are that a trade agreement between the U.S and China would be a boost for growth.

Following the previous week’s 3-month/3-year yield curve inversion, the spread moved back into positive territory in the week.

Freddie Mac Rates

The weekly average rates for new mortgages as of 4th April were quoted by Freddie Mac to be:

  • 30-year fixed rates rose 2 basis points to 4.08% in the week. Rates were down from 4.40% from a year ago. The average fee held steady at 0.5 points.
  • 15-year fixed rates slipped by 1 basis points to 3.56% in the week. Rates were down from 3.87% from a year ago. The average fee held steady at 0.4 points.
  • 5-year fixed rates fell by 9 basis points to 3.66% in the week. Rates increased by 4 basis points from last year’s 3.62%. The average fee increased from 0.3 points to 0.4 points.

According to Freddie Mac, mortgage application demand saw the 2nd largest weekly increase over the last 12-months. The jump was attributed to a surge in refinancing activity. Freddie Mac also noted that overall mortgage demand rose to the highest level since the 4th quarter of 2016.

Mortgage Bankers’ Association Rates

For the week ending 29th March, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.48% to 4.41%. Points remained unchanged at 0.48 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.45% to 4.36%. Points increased from 0.39 to 0.44 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.35% to 4.21%. Points decreased from 0.27 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, jumped by 18.6% in the week ending 29th March. The surge came off the back of an 8.9% increase in the previous week.

The Refinance Index surged by 39% in the week ending 29th March to its highest level since Nov-16. The increase followed on from a 12% rise from the previous week.

The share of refinance mortgages increased from 40.4% to 47.4%, following an increase from 39.2% to 40.4% in the week prior.

The Mortgage Bankers Association also released its mortgage credit availability report for March. According to the report released on 4th April,

  • The Mortgage Credit Availability Index (MCAI) increased by 1.1% to 182.1 in March.
  • The increase in the MCAI reflected a loosening in lending standards at the end of the quarter.
  • Jumbo mortgage offerings drove the upward move in the MCAI. The Jumbo sub-index rose by 5% in March to reach its highest level since last November.
  • A jump in the refinance of jumbo loans was key to the Jumbo sub-index rise in the month.

For the week ahead

Economic data due out through the first half of the week includes factory order and job opening figures on Monday and Tuesday. While March inflation figures due out on Wednesday, will also provide direction to Treasury yields, the focus will likely be on the FOMC meeting minutes.

Further chatter on the balance sheet sell-off and any hints of a need to reverse December’s rate hike could provide further support to mortgage rates.

FED Chair Powell and FOMC member chatter through the first half of the week will also need to be considered.

Away from the economic calendar, progress on the U.S – China trade talks and updates on Brexit will also be a factor.

The start of the week could see yields ease back following Friday’s labor market stats out of the U.S. Slower wage growth weighed on Treasury yields at the end of the week, offsetting the effect of better than anticipated NFP numbers.

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