Mortgage rates increased for the 1st time in 7-weeks in the week ending 20th June. 30-year fixed rates rose by 2 basis points to 3.84% following no change from the previous week. That left 30-year rates close to a 2-year low according to figures released by Freddie Mac.
Compared to this time last year, 30-year fixed rates were down by 73 basis points.
More significantly, 30-year fixed rates are down by 110 basis points since last November’s most recent peak of 4.94%.
Economic Data from the Week
It was yet another relatively quiet 1st half of the week. June NY Empire State manufacturing index numbers disappointed on Monday.
From the housing sector, May building permit and housing start figures were mixed on Tuesday. While building permits rose by 0.3% in May, housing starts fell by 0.9%. The decline came off the back of a 6.8% jump in April, which left Treasury yields largely unaffected.
While the stats were on the lighter side, concerns over rising tension in the Middle East provided support for U.S Treasuries, whilst hopes of a productive Trump – Xi meeting at the G20 offset any material slide in yields.
In spite of the geopolitical risks, the market focus going through to Wednesday remained on the FED. The FOMC economic projections and press conference did ultimately sink the Dollar, which led to 10-year yields falling back to sub-2% for the 1st time since Nov-16.
Freddie Mac Rates
The weekly average rates for new mortgages as of 20th June were quoted by Freddie Mac to be:
- 30-year fixed rates increased by 2 basis points to 3.84% in the week. Rates were down from 4.57% from a year ago. The average fee decreased from 0.6 points to 0.5 points.
- 15-year fixed rates fell by 1 basis point to 3.25% in the week. Rates were down from 4.04% from a year ago. The average fee fell from 0.5 points to 0.4 points.
- 5-year fixed rates fell by 3 basis points to 3.48% in the week. Rates were down by 35 basis points from last year’s 3.83%. The average fee held steady at 0.4 points.
According to Freddie Mac, while the drop in mortgage rates hit pause, homebuyer demand remained resilient. Freddie Mac noted an increase in both purchasing activity and loan amounts, reflecting continued support for the sector. Freddie Mac attributed low mortgage rates, strong job market, solid wage growth, and consumer confidence to the support.
Mortgage Bankers’ Association Rates
For the week ending 14th June, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, increased from 4.09% to 4.12%. Points increased from 0.26 to 0.44 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances increased from 4.12% to 4.14%. Points increased from 0.33 to 0.38 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances remained unchanged at 4.04%. Points increased from 0.17 to 0.24 (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, decreased by 3.4% in the week ending 14th June. The fall followed a 26.8% surge in the week ending 7th June.
The Refinance Index fell by 4% in the week ending 14th June. The Index had jumped by 47% in the previous week ending 7th June.
The share of refinance mortgage activity increased from 49.8% to 50.2%, following an increase from 42.2% to 49.8% in the week prior.
According to the MBA, overall refinance activity eased after a slight increase in 30-year mortgage rates. While borrowers continued to remain sensitive to rising mortgage rates, the refinance share of applications continued to sit at its highest level since Jan-18. The MBA also noted that refinance activity sit its 2nd highest level this year.
The MBA added that, while purchase applications fell by more than 3%, applications are still up by almost 4% from last year. Strong demand from 1st-time buyers and low unemployment levels continue to provide support.
For the week ahead
It’s a relatively busier start to the week, with consumer confidence figures and durable goods orders due out on Tuesday and Wednesday.
While positive numbers would provide support to U.S Treasury yields, the FED’s latest FOMC economic projections and Friday’s private sector PMI numbers will set the tone early on.
Outside of the numbers, geopolitical risk will continue to influence. We can expect the markets to tread carefully ahead of the G20 Summit at the end of the week. There is also rising tension in the Middle East to consider, which could pin back Treasury yields and mortgage rates.
Interestingly, the FED’s concerns over the economic outlook could also influence home buying activity. The Global Financial Crisis was not too long ago and any talk of an economic slowdown could see buying activity grind to a halt.
This article was originally posted on FX Empire
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