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Mortgage rates tumbled by 22 basis points to 4.06% in the week ending 28th March. The latest slide was the largest one-week drop in a decade according to figures were released by Freddie Mac.

Following the weekly decline, 30-year fixed rates stood 38 basis points below levels from 12-months ago.

Since the most recent peak at mid-November of last year, 30-year fixed rates have fallen by 88 basis points. While there are some concerns over the economic outlook, reflected in recent consumer confidence numbers, positive labor market conditions, a pullback in house prices and a slide in mortgage rates provide support for the sector.

Economic Data from the Week

Economic data released through the week included consumer confidence and trade data ahead of the weekly calculation of mortgage rates.

A slide in consumer confidence offset the effects of a narrowing in the trade deficit in January. While the data was not particularly alarming, negative sentiment towards the global economic outlook pinned back U.S Treasury yields.

Outside of the numbers, weighing on yields included a lack of progress on Brexit and dovish commentary from ECB President Draghi.

The negative sentiment towards the global economic outlook led to an inversion of the 3-month / 10-year yield curve. While there continues to be plenty of debate over whether a recession is imminent, anticipated support from central banks eased market tensions in the latter part of the week.

From the housing sector, housing starts and building permits slid in February, with house prices rising at a much slower pace in January.

The disappointing building permit and housing start figures will have been due to weather conditions. Recent application figures point to a solid 2nd quarter for the sector, though much will depend on labor market conditions and consumer sentiment.

For now, the stats point to a continued pickup in housing sector activity, supported by the slide in mortgage rate since mid-November.


Freddie Mac Rates

The weekly average rates for new mortgages as of 28th March were quoted by Freddie Mac to be:

  • 30-year fixed rates tumbled by 22 basis points to 4.06% in the week. Rates were down from 4.44% from a year ago. The average fee rose from 0.4 points to 0.5 points.
  • 15-year fixed rates slipped by 14 basis points to 3.57% in the week. Rates were down from 3.90% from a year ago. The average fee held steady at 0.4 points.
  • 5-year fixed rates fell by 9 basis points to 3.75% in the week. Rates increased by 9 basis points from last year’s 3.76%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates

For the week ending 22nd March, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.59% to 4.48%. Points decreased from 0.50 to 0.48 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.55% to 4.45%. Points decreased from 0.42 to 0.39 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.37% to 4.35%. Points increased from 0.23 to 0.27 (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 8.9% in the week ending 22nd  March. The increase follows on from a 1.6% increase from the previous week.

The Refinance Index surged by 12% in the week ending 22nd March. The increase followed on from a 4% rise from the previous week.

The share of refinance mortgages increased from 39.2% to 40.4%, following an increase from 38.6% to 39.2% in the week prior.

For the week ahead

It’s a big week ahead on the data front.

A pickup in U.S Treasury yields late last week will provide some early support. With a particularly busy economic calendar, however, any upward pressure will be dependent upon the numbers.

Current market expectation is for the FED to cut rates in September.

Key stats scheduled for release through the week that will influence sentiment towards the economy and policy.

February retail sales and March ISM manufacturing PMI numbers are due out on Monday. Following the influence on 4th quarter GDP numbers, sensitivity to the February numbers will be heightened.

February durable goods orders due out on Tuesday will also provide direction ahead of another high impact day on Wednesday. March ADP nonfarm employment change and ISM non-manufacturing PMI numbers are due out.

While we can expect the stats to have a hand in the direction of U.S Treasury yields and mortgage rates, we can also anticipate influence from elsewhere.

Manufacturing PMI number out of China that was released on Sunday, and is also due out on Monday, will have an influence on market risk sentiment.

Outside the stats, Brexit and sentiment towards the U.S – China trade negotiations will also need to be considered along with FOMC member commentary through the week.

Another yield curve inversion and expect U.S mortgage rates to take another slide in the week ahead.

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