U.S Mortgages – Rates Tumble in a 6th Consecutive Weekly FallMortgage rates tumble as concerns over trade and the economic outlook drove demand for U.S Treasuries.
Mortgage rates fell for a 6th consecutive week in the week ending 6th June. 30-year fixed rates slumped by 17 basis points following on from a 7 basis point fall from the previous week. The 17 basis point fall took 30-year rates to a 2-year low 3.82% according to figures released by Freddie Mac.
Following the weekly fall, 30-year fixed rates stood 72 basis points below levels from 12-months ago.
More significantly, 30-year fixed rates have fallen by 112 basis points since last November’s most recent peak of 4.94%.
Economic Data from the Week
Economic data through the first half of the week was on the heavier side, with May private-sector PMI figures and ADP nonfarm employment change numbers in focus.
On the positive side, the market’s preferred ISM non-manufacturing PMI rose from 55.5 to 56.9 in May, which was better than forecasted.
On the negative front, the ISM manufacturing PMI fell from 52.8 to 52.1 in May, with U.S factory orders falling by 0.8% in April.
Adding to the negative sentiment was May’s ADP employment change figure. According to the ADP, nonfarm payrolls increased by just 27k, falling well short of a forecasted 185k.
With the stats skewed to the negative, yields were under pressure as trade war jitters also influenced.
On the monetary policy front, FED Chair Powell stepped forward to reassure the markets that the FED would cut rates should the need arise.
The combination of trade war jitters, concerns over the economic outlook and a shift in FED forward guidance drove mortgage rates down in the week.
Freddie Mac Rates
The weekly average rates for new mortgages as of 6th June were quoted by Freddie Mac to be:
- 30-year fixed rates fell by 17 basis points to 3.82% in the week. Rates were down from 4.54% from a year ago. The average fee held steady at 0.5 points.
- 15-year fixed rates slid by 18 basis points to 3.28% in the week. Rates were down from 4.01% from a year ago. The average fee held steady at 0.5 points.
- 5-year fixed rates fell by 8 basis points to 3.52% in the week. Rates were down by 22 basis points from last year’s 3.74%. The average fee held steady at 0.4 points.
According to Freddie Mac, more than $2 trillion of outstanding conforming conventional mortgages are eligible for refinancing, supporting homeowners looking to refinance.
Mortgage Bankers’ Association Rates
For the week ending 31st May, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.33% to 4.24%. Points decreased from 0.43 to 0.33 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances fell from 4.33% to 4.23%. Points decreased from 0.42 to 0.33 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances decreased from 4.18% to 4.09%. Points decreased from 0.23 to 0.21 (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 1.5% in the week ending 31st May. The increase partially reversed a 3.3% fall in the week ending 24th May.
The Refinance Index increased by 6% in the week ending 31st May. The Index had decreased by 6% in the previous week ending 24th May.
The share of refinance mortgage activity increased from 39.7% to 42.2%, following a decrease from 40.5% to 39.7% in the week prior.
According to the MBA, concerns over trade tensions between the U.S and China and Mexico pinned mortgage rates back in the week.
The continued fall in mortgage rates brought an end to a 3 consecutive week in mortgage applications.
For the week ahead
It’s a relatively quiet 1st half of the week. Key stats due out of the U.S include JOLTs job openings figures and wholesale and consumer price figures.
Of greatest influence will be Wednesday’s inflation numbers, with any softer inflation figures likely to add further downward pressure on yields and ultimately mortgage rates.
Market reaction to last Friday’s nonfarm payroll and wage growth figures will also influence yields in the week ahead.
While we can expect the stats to influence sentiment towards the economic outlook and monetary policy, it will boil down to trade war chatter in the week.
We would expect U.S Treasury yields to bounce back should there be any talk of an end to the ongoing trade disputes between the U.S and China. An agreement between the U.S and Mexico should support an uptick in yields at the start of the week.