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US Mortgage Rates Rise for a Second Consecutive Week

By:
Bob Mason

This week, mortgage rates are in the hands of the FED. There is a high degree of uncertainty, with rate hike bets ranging from 50 to 100-basis points.

Home loan / reverse mortgage or transforming assets into cash concept : House model, US dollar notes on a simple balance scale, depicts a homeowner or a borrower turns properties / residence into cash

In the week ending July 21, mortgage rates increased for a second consecutive week.

30-year fixed rates rose by three basis points. Following a 21-basis point surge from the previous week, mortgage rates returned to 5.54%.

Year-on-year, 30-year fixed rates were up by 276 basis points and by 60 basis points since the November 2018 peak of 4.94%.

Economic Data from the Week

There were no US economic indicators to provide US Treasuries with direction, leaving market sentiment towards Fed monetary policy in focus.

Housing sector data from the US continued to show weakness at the end of the second quarter.

Building permits fell by 0.6%, following a 7.0% slump in May. Housing starts fell by 2.0%, following an 11.9% tumble in May.

Existing home sales reflected the impact of higher mortgage rates on demand. In June, existing home sales followed a 3.4% fall from May with a 5.4% decline.

With the Fed in the blackout period from July 16 to July 28, there was no FOMC member chatter to influence.

Freddie Mac Rates

The weekly average rates for new mortgages, as of July 21, 2022, were quoted by Freddie Mac to be:

  • 30-year fixed rates rose by three basis points to 5.54%. This time last year, rates stood at 2.78%. The average fee held steady at 0.8 points.
  • 15-year fixed rates increased by eight basis points to 4.75%. Rates were up by 263 basis points from 2.12% a year ago. The average fee remained unchanged at 0.8 points.
  • 5-year fixed rates declined by four basis points to 4.31%. Rates were up by 182 basis points from 2.49% a year ago. The average fee increased from 0.2 points to 0.3 points.

According to Freddie Mac,

  • Housing activity remained weak, weighed by a further uptick in mortgage rates.
  • Consumer concerns over rising rates, inflation, and the risk of a recession pegged back demand.
  • Due to the current headwinds, house price appreciation is likely to slow noticeably.

Mortgage Bankers’ Association Rates

For the week ending July 15, 2022, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances increased from 5.74% to 5.82%. Points rose from 0.59 to 0.65 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA rose from 5.49% to 5.50%. Points decreased from 1.08 to 1.02 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 5.25% to 5.31%. Points remained unchanged at 0.38 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, fell by 6.3% in the week ending July 15. The Index declined by 1.7% in the week prior.

The Refinance Index decreased by 4% from the previous week and was 80% lower than the same week one year ago. In the week prior, the Index increased by 2%.

The refinance share of mortgage activity rose from 30.8% to 31.4%. In the previous week, the refinance share increased from 29.6% to 30.8%.

According to the MBA,

  • Mortgage applications fell for a third consecutive week to their lowest level since 2000.
  • Higher mortgage rates weighed on applications, with rates more than two percentage points higher than July 2021.
  • Refinances were also taking a hit, with the Refinance Index sliding to a 22-year low.
  • Higher inflation, the weakening economic outlook, and affordability weighed on demand.

For the week ahead

It is a big week ahead for the global financial markets, and US mortgage rates will also be in the spotlight.

On Tuesday, US consumer confidence figures will draw interest. Weak numbers will likely test support for riskier assets. Core durable goods will also influence mid-week.

However, the Fed monetary policy decision is the event of the week. On Wednesday, the markets expect a sizeable rate hike, the only question being whether it is a 75-basis point or 100-basis point rate hike.

Disappointing private sector PMI numbers from Friday could even raise the chances of a smaller 50-basis point hike, highlighting the degree of uncertainty.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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