U.S Mortgages – Rates Rise for a 2nd Time This Year

Mortgage rates were on the rise for just the 2nd time this year. While applications slipped, optimism continues to bring hope to the housing sector.
Bob Mason
Upscale modern house for sale

Mortgage rates rose by 6 basis points to 4.41% in the week ending 7th March. Since mid-November’s peak 4.94%, it was only the 2nd increase in mortgage rates. The last increase was a 1 basis point rise at the end of January. The figures were released by Freddie Mac.

In spite of the weekly increase, 30-year fixed rates continued to sit below levels from 12-months ago.

Since the most recent peak at mid-November of last year, 30-year fixed rates have fallen by 53 basis points.

Economic Data from the Week

Economic data was on the lighter side through the early part of the week. Key stats included service sector PMI numbers, trade data, and the ADP’s nonfarm employment change figures.

Better than expected service sector activity in February contributed to a pickup in U.S Treasury yields ahead of a Thursday slide.

While February’s nonfarm employment change number came in softer than forecasted on Wednesday, a marked upward revision to January numbers was positive.

On the downside was a widening in the U.S trade deficit. Weaker global demand for U.S goods and services, coupled with strong demand for foreign goods led to the widening.

On the housing front, new home sales rose by 3.7% in December. The increase came off the back of a 9.1% jump in November. Falling mortgage rates and strong labor market conditions continue to point to a pickup in housing sector activity in the coming months.

Freddie Mac Rates

The weekly average rates for new mortgages as of 7th March were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 6 basis points to 4.41% in the week. Rates were down from 4.46% from a year ago. The average fee also remained unchanged at 0.5 points.
  • 15-year fixed rates rose by 6 basis points to 3.83% in the week. Rates were down from 3.94% from a year ago. The average fee decreased from 0.5 points to 0.4 points.
  • 5-year fixed rates increased by 3 basis points to 3.87% in the week. Rates increased by 24 basis points from last year’s 3.63%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates

For the week ending 1st March, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.64% to 4.66%. Points remained unchanged at 0.48 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 4.65% to 4.67%. Points increased from 0.42 to 0.44 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.40% to 4.41%. Points decreased from 0.29 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, fell by 2.5% in the week ending 1st March. The decline partially reversed a 5.3% rise from the previous week.

The Refinance Index fell by 2% in the week ending 1st March. The decline partially reversed a 5% rise from the previous week.

The share of refinance mortgages decreased from 40.4% to 40.0%, following a fall from 41.7% to 40.4% in the week prior.

According to the MBA, marginally higher mortgage rates led to a fall in applications in the week. The MBA also noted that the average loan size for purchase applications increased to a record high.

The MBA also released its quarterly delinquency figures for the 4th quarter of last year and credit availability numbers for February.

Mortgage Delinquency Rates and Credit Availability

In the 4th quarter of last year, based on the unpaid principal balance of loans, delinquency rates were as follows: (The Mortgage Bankers Associations’ Commercial / Multifamily Delinquency Report)

  • Banks and thrifts (90 or more days delinquent or in nonaccrual): 0.48%, unchanged from 3rd
  • Life company portfolios (60 or more days delinquent): 0.05%, an increase of 0.01 percentage points from the 3rd
  • Fannie Mae (60 or more days delinquent): 0.06%, a decrease of 0.01 percentage points from the 3rd
  • Freddie Mac (60 or more days delinquent): 0.01%, unchanged from the 3rd
  • CMBS (30 or more days delinquent or in REO): 2.77%, a fall of 0.28 percentage points from the previous quarter.

According to the Mortgage Credit Availability Index (MCAI), credit availability increased in February.

The MCAI increased by 0.6% to 180.1 in February. The increase reflected looser credit conditions throughout the month.

For the week ahead

It’s a big week ahead for the U.S Dollar and U.S Treasury yields will provide mortgage rates with another move in the week.

January retail sales figures kick off the week. Expectations are for consumer spending to deliver, as confidence picks up at the turn of the year.

While retail sales are expected to be positive for yields, February inflation figures are expected to weigh. The annual rate of core inflation is forecasted to soften from 2.2% to 2.1%, which would be yield negative.

Durable goods orders and wholesale inflation figures on Wednesday will also have an impact on yields ahead of the weekly mortgage rate release.

Outside of the numbers, the ECB’s dire outlook on growth could give prospective home buyers a boost, a slide in U.S Treasuries last coming in response to the ECB press conference.

Geopolitical risk factors are ever present and will also play a hand. There are Brexit and U.S – China trade talks to consider in the week.

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