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Mortgage rates eased back in the week ending 16th April, with rates down for a 3rd week in 4. In the previous week, mortgage rates had held steady at 3.33%.
The downward trend resumed after having seen mortgage rates on the rise in mid-March. The upward trend had been due to a surge in demand stemming from falling mortgage rates. At the turn of the quarter, however, rates hit reverse as the FED delivered and purchase applications hit reverse.
Compared to this time last year, 30-year fixed rates were down by 86 basis points.
30-year fixed rates were also down by 163 basis points since November 2018’s most recent peak of 4.94%.
Economic Data from the Week
Economic data was on the heavier side in the week. Key stats included March retail sales figures, April manufacturing numbers, and the weekly jobless claims numbers.
Core retail sales slid by 4.5%, month-on-month, in March, with retail sales tumbling by 8.7%.
Manufacturing figures also sounded the alarm bells in April. The NY Empire State Manufacturing Index slid from -21.5 to -78.2, with the Philly FED Index tumbling from -12.7 to -56.6.
The weekly jobless claims figures were also dire, with a 5.245m increase in jobless claims in the week ending 10th April.
From the housing sector, building permits and housing starts suggested a shift in sentiment across contractors. Building permits fell by 6.8%, with housing starts tumbling by 22.3%.
In reality, when considering the economic data on its own, mortgage rates should have seen a more significant decline.
Talk of U.S member states planning to reopen and a downward trend in new coronavirus cases supported yields early in the week.
This was in spite of the IMF delivering some quite alarming economic growth forecasts for 2020 in the early part of the week. For the U.S, the IMF forecasted a 5.9% contraction in 2020. Perhaps more importantly, the IMF also talked down the chances of a V-shaped economic rebound…
Freddie Mac Rates
The weekly average rates for new mortgages as of 16th April were quoted by Freddie Mac to be:
30-year fixed rates fell by 2 basis points to 3.31% in the week. Rates were down from 4.17% from a year ago. The average fee remained unchanged at 0.7 points.
15-year fixed rose by 3 basis points 2.80% in the week. Rates were down from 3.62% compared with a year ago. The average fee increased from 0.6 points to 0.7 points.
5-year fixed rates fell by 6 basis points to 3.34% in the week. Rates were down by 44 points from last year’s 3.78%. The average fee held steady at 0.3 points.
According to Freddie Mac, mortgage rates continued to hover close to all-time lowers for a 3rd consecutive week. The low rate environment continued to support refinance activity, while concerns over the economy weighed on purchase applications.
Freddie Mac noted that, while monthly economic data was driving the markets lower in the week, these are lagging indicators. Realtime daily economic activity metrics, in contrast, suggest that the economy may be close to bottoming out.
From a market perspective, it is no longer about by how much the economy has contracted, but for how long it will contract.
Mortgage Bankers’ Association Rates
For the week ending 10th April, rates were quoted to be:
Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.54% to 3.45. Points remained unchanged at 0.19 (incl. origination fee) for 80% LTV loans.
Average interest rates for 30-year fixed with conforming loan balances decreased from 3.49% to 3.45%. Points increased from 0.28 to 0.29 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances decreased from 3.87% to 3.80%. Points fell from 0.26 to 0.23 (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 7.3% in the week ending 10th April. In the week prior, the index had tumbled by 17.9%.
The Refinance Index increased by 10% and was 192% higher than the same week a year ago. In the previous week, the Index had slid by 19%.
The refinance share of mortgage activity increased from 74.2% to 76.2% in the week. In the week prior, the share had declined from 75.9% to 74.2%.
According to the MBA:
30-year fixed mortgage rates fell to the lowest level in the MBA’s survey at 3.45%.
The decline came in spite of rising Treasury yields, suggesting that the MBS market is stabilizing.
Lenders also progressed through backlogs, allowing for mortgage rates to be lowered.
Refinance activity has experienced a volatile 4-weeks, with lower rates expected to benefit many borrowers.
Purchase applications fell for a 5th consecutive week, with the Purchase Index down by approx. 35% from the 1st week of March.
The purchase market is expected to rebound, however, as long as the measures to reduce the spread of COVID-19 are successful.
For the week ahead
It’s a relatively busy week for the Greenback.
Key stats include April private sector PMIs and the weekly jobless claims figures due out on Thursday.
From the housing sector, March existing home sales and new home sales figures are also due out.
While we can expect the stats to influence yields, it will ultimately come down to government plans to ease containment measures.
Last week we heard of a phased plan to kick-start the U.S economy. Expect further details of this and COVID-19 numbers to remain the key driver in the week.
More details on a new drug that is reportedly effective in treating COVID-19 will also influence.
This article was originally posted on FX Empire