After 2 consecutive weekly rises, U.S mortgage rates fell back to sub-3% levels in the week ending 27th May.
Reversing a 6-basis points rise from the previous week, 30-year fixed rates fell by 5 basis points to 2.95%.
Compared to this time last year, 30-year fixed rates were down by 20 basis points.
30-year fixed rates were still down by 199 basis points since November 2018’s last peak of 4.94%.
Economic Data from the Week
It was another quiet first half of the week on the U.S economic calendar.
Key stats included consumer confidence figures for May and housing sector data for April.
The CB Consumer Confidence Index slipped from 117.5 to 117.2 in May. In spite of the decline, there were few alarm bells, however, with market optimism towards the economic outlook key in the week.
On the housing data front, however, the numbers were mixed.
In April, new home sales slid by 5.9%, with pending home sales falling by 4.4%. Low inventories were to blame for the disappointing numbers.
With inventories an issue, house prices continue to rise. In March, the S&P/CS HPI Composite – 20 n.s.a was up 13.3% year-on-year. In February, the index had been up 12%.
Freddie Mac Rates
The weekly average rates for new mortgages as of 27th May were quoted by Freddie Mac to be:
30-year fixed rates fell by 5 basis point to 2.95% in the week. This time last year, rates had stood at 3.15%. The average fee rose from 0.6 to 0.7 points.
15-year fixed rates decreased by 2 basis points to 2.27% in the week. Rates were down by 35 basis points from 2.62% a year ago. The average fee fell from 0.7 points to 0.6 points.
5-year fixed rates remained unchanged at 2.59% for a second consecutive week. Rates were down by 54 points from 3.13% a year ago. The average fee declined from 0.3 points to 0.2 points.
According to Freddie Mac,
The fall in mortgage rates to below 3% continued to offer many homeowners the potential to refinance and increase their monthly cash flow.
Homeowners who refinanced their 30-year fixed mortgage in 2020 saved more than $2,800 annually.
Substantial opportunity continues to exist today.
Mortgage Bankers’ Association Rates
For the week ending 21st May, the rates were:
Average interest rates for 30-year fixed with conforming loan balances increased from 3.15% to 3.18%. Points decreased from 0.36 to 0.35 (incl. origination fee) for 80% LTV loans.
Average 30-year fixed mortgage rates backed by FHA increased from 3.13% to 3.20%. Points fell from 0.30 to 0.25 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances decreased from 3.31% to 3.30%. Points increased from 0.27 to 0.30 (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, slid by 4.2% in the week ending 21st May. In the week prior, the index had increased by 1.2%.
The Refinance Index fell by 7% from the previous week and was 9% lower than the same week one year ago. The Index had risen by 4% in the previous week.
In the week ending 21st May, the refinance share of mortgage activity decreased from 63.3% to 61.4% of total applications. The share had increased from 61.3% to 63.3% in the previous week.
According to the MBA,
Mortgage applications decreased last week as mortgage rates increased to 3.18%.
Refinances also declined as a result.
Purchase applications increased for the second time in 3-weeks, rebounding after a rather week April.
While purchase activity was around 4% lower than a year ago, the comparison is to last spring’s upswing in activity as pandemic-related lockdowns lifted.
Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices.
For the week ahead
It’s another quiet first half of the week on the U.S economic calendar. Manufacturing PMI figures for May will be in focus on Tuesday.
The market’s preferred ISM survey-based figures will be the key driver early in the week.
From elsewhere, private sector data from China will also influence market risk sentiment early in the week.
On the monetary policy front, central bank chatter will also need digesting.
This article was originally posted on FX Empire