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Bob Mason
rates

Mortgage rates rose for the first time in 4-weeks in the week ending 12th July, while the downward trend still persists, with rates down in five of the last seven weeks, according to figures released by Freddie Mac.

The downward trend has been supported by continued market jitters over the trade war between the U.S and China and other key economies that has pinned back 10-year Treasury yields, providing some much needed respite to prospective home buyers through the summer.

June inflation figures released on Thursday showed that headline inflation had jumped to 2.9%, the highest level since early 2012, with the annual rate of core inflation hitting 2.3%. While the FED has been vocal on its willingness to allow inflation to overshoot over the short-term, things could get tricky, particularly should inflation accelerate further as a result of the trade war and domestic consumption and the U.S economy begin to slow.

From June’s labour market figures, while nonfarm payrolls impressed, wage growth disappointed, which will become a concern should consumer prices continue to rise and wage growth lag.

While wage growth came in softer than had been expected in June, one positive will have been May’s JOTLs job openings report that showed the U.S job quit rate hitting the highest level since April 2001, the quit rate not only being a reflection of confidence within the labour market, but also a contributory factor to wage growth.

Freddie Mac weekly average rates for new mortgages as of 12th July were quoted to be:

  • 30-year fixed rate loan increased from 4.52% to 4.53% in the week, while up from 4.03% a year ago.
  • 15-year fixed rates rose from 3.99% to 4.02% in the week, while up from 3.29% from a year ago.
  • 5-year fixed rates jumped from 3.74% to 3.86% over the week, while up from last year’s 3.28%.

Mortgage Bankers’ Association Rates for the week ending 6th July were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, bucked the trend increasing from 4.78% to 4.80%.
  • Average interest rate for 30-year fixed with conforming loan balances decreased from 4.79% to 4.76%.
  • Average 30-year rates for jumbo loan balances decreased from 4.71% to 4.68%.

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 2.5%, following the previous week’s 0.5% fall, week-on-week.

The Refinance Index fell by 4% to the lowest level since December 2000, in the week ending 6th July, following the previous week’s 2% fall, with the refinance share of mortgages falling from 37.2% to 34.8%, the fall taking the refinance share of mortgages to the lowest level since August 2008.

The Bankers’ Mortgage Association also released its June mortgage application figures, reporting that:

  • Mortgage applications for new homes purchased fell by 8.8% compared with June 2017 and by 12%, month-on-month.
  • For 6-months to the end of June 2018, new home applications were up 2.5%, when compared with the first 6-months of 2017.
  • The average loan size of new homes was reported to have fallen from $337,515 to $333,033 from May to June.

For the week ahead, economic data out of the U.S is on the lighter side, with key stats including June retail sales figures due out on Monday and building permit and housing start figures on Wednesday, while the markets will also get a sense of whether the trade war has had any impact on the manufacturing sector, with NY State and Philadelphia’s July manufacturing PMI numbers scheduled for release on Monday and Thursday.

Disappointing numbers may well continue to pin back 10-year Treasury yields, with any hints of a slowdown in the U.S economy, attributable to the trade war, likely to drive demand for U.S Treasuries, particularly as Trump looks to up the ante with fresh tariffs to be introduced on an additional $200bn worth of imports from China, though much will now depend on whether China and the U.S can meet and find common ground. With the U.S – Russia Summit at the start of the week, the geo-political rollercoaster rides on.

While the stats will certainly influence through the week, the Oval Office will remain the focal point for the global financial markets and ultimately the direction of U.S mortgage rates, with any more concrete signs of a willingness to return to the negotiating table likely to see 10-year Treasury yields bounce, which would see mortgage rates resume the upward trend seen through most of the year.

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