Mortgage rates fell for the 1st time in 3-weeks in the week ending 26th March, with the downside coming from FED support.
Despite the continued spread of the coronavirus across the U.S and risk aversion, 30-year fixed rates had risen ahead of last week’s pullback.
Over the previous 2-weeks, lenders had raised rates to combat a surge in applications. Freddie Mac had reported a fall in demand going into last week, however, which allowed lenders to lower rates.
Adding to the downside was the FED’s unlimited bond purchasing program. This includes the purchasing of mortgage-backed securities.
Compared to this time last year, 30-year fixed rates were down by 56 basis points.
30-year fixed rates were also down by 144 basis points since November 2018’s most recent peak of 4.94%.
Economic Data from the Week
Economic data took a back seat once more in through the 1st half of the week. The data was particularly dire, however, with private sector PMI and labor market figures painting a grim picture.
According to the March prelim private sector PMIs, the Composite and Services Sector PMI fell to all-time lows. Things were not much better for the manufacturing sector, with the PMI falling to a 127-month low.
Labor market numbers were no better, with initial jobless claims surging by 3.283m, also a series record.
It was ultimately the passing of the U.S Stimulus Bill, alongside the FED’s support, that delivered support to riskier assets.
Freddie Mac Rates
The weekly average rates for new mortgages as of 26th March were quoted by Freddie Mac to be:
- 30-year fixed rates fell by 15 basis points to 3.50% in the week. Rates were down from 4.06% from a year ago. The average fee remained unchanged at 0.7 points.
- 15-year fixed fell by 14 basis points 2.92% in the week. Rates were down from 3.57% compared with a year ago. The average fee fell from 0.7 to 0.6 points.
- 5-year fixed rates surged by 23 basis points to 3.34% in the week. Rates were down by 41 points from last year’s 3.75%. The average fee increased from 0.2 to 0.3 points.
According to Freddie Mac, the FED’s swift and significant efforts to stabilize the markets delivered the downside in the week.
Similar to other segments of the economy, Freddie Mac also noted that demand is softening. Freddie Mac expects the combined effect of FED action and fiscal stimulus to provide substantial support to the mortgage markets, however.
Mortgage Bankers’ Association Rates
For the week ending 20th March, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.71% to 3.69. Points increased from 0.28 to 0.43 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances increased from 3.74% to 3.82%. Points decreased from 0.37 to 0.35 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances rose from 3.77% to 3.84%. Points rose from 0.32 to 0.35 (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, tumbled by 29.4% in the week ending 20th March. In the previous week, the Index had fallen by 8.4%.
The Refinance Index slumped by 34% from the previous week and was 195% than the same week a year ago. In the previous week, the index had fallen by 10%.
The refinance share of mortgage activity decreased from 74.5% to 69.3% in the week ending 20th March. In the prior week, the share had fallen from 76.5% to 74.5%.
According to the MBA:
- 30-year fixed mortgage rates had reached its highest level since mid-January last week. This was despite Treasury yields sitting at relatively low levels.
- Secondary market volatility and lenders grappled with capacity issues and backlogs and staff working remotely contributed to the rise.
- Higher rates led to the slide in refinance activity.
- FED action to restore liquidity and stability, however, could put downward pressure on mortgage rates.
- The MBA noted that the rise in rates impacted home purchase applications, as did widespread economic disruption and uncertainty over what lies ahead.
- Notably, purchase applications were down 11% compared to a year ago. This was the first year-on-year decline in over 3-months.
For the week ahead
It’s another relatively busy 1st half of the week for the Greenback.
Key stats in the week include March consumer confidence figures due out on Tuesday and ISM Manufacturing PMIs on Wednesday.
Following last week’s initial jobless claims figures, the markets may be somewhat numb to labor market figures this week.
ADP nonfarm employment change figures for March are due out on Wednesday, with the weekly initial jobless claims on Thursday.
We could see another jump in the weekly jobless claims, as the shutdown across the U.S continued…
From the housing sector, February pending home sales figures and January house price figures should have a muted impact.
Outside of the numbers, expect coronavirus news updates and chatter from Capitol Hill to remain the key drivers in the week.
This article was originally posted on FX Empire
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