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U.S Mortgage Rates Rise. In the Week Ahead, Geopolitics and Stats Will Influence

Bob Mason
·5 mins read

Mortgage rates were on the rise in the week ending 24th September. Following a 1 basis point rise in the week prior, the 30-year fixed rose by 3 basis points to 2.90%.

Compared to this time last year, 30-year fixed rates were down by 74 basis points.

30-year fixed rates were down by 204 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the quieter side in the 1st half of the week.

Key stats included September’s prelim private sector PMI and the weekly jobless claims figures.

It was a mixed set of numbers, with service sector growth slowing, while manufacturing sector activity picked up.

The stalling in the economic recovery was of greater concern in the week, though the PMI decline was marginal.

On Thursday, the weekly jobless claims also disappointed. In the week ending 18th September, initial jobless claims stood at 870K, up from 866k from the week prior.

While the numbers were not horrific, an upward trend in claims was of concern.

Housing sector data in the week also drew attention. In August, existing-home sales rose by 2.4%, with new home sales rising by 4.8%.

On the monetary policy from, FED Chair Powell delivered testimony on Capitol Hill in the week. Powell failed to hit mortgage rates. News of a spike in new COVID-19 cases also failed to pin mortgage rates back.

Freddie Mac Rates

The weekly average rates for new mortgages as of 24th September were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 3 basis points to 2.90% in the week. Rates were down from 3.64% from a year ago. The average fee remained unchanged at 0.8 points.

  • 15-year fixed rates rose by 5 basis points to 2.40% in the week. Rates were down from 3.16% compared with a year ago. The average fee decreased from 0.8 points to 0.7 points.

  • 5-year fixed rates fell by 6 basis points to 2.90% in the week. Rates were down by 48 points from last year’s 3.38%. The average fee declined from 0.3 points to 0.2 points.

According to Freddie Mac,

  • Mortgage rates set several record lows over the last few months and have remained low into September.

  • While there is room for rates to decrease further, higher home prices and low inventory could possibly stifle the high demand.

Mortgage Bankers’ Association Rates

For the week ending 18th September, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 3.16% to 3.23%. Points increased from 0.35 to 0.37 (incl. origination fee) for 80% LTV loans.

  • Average interest rates for 30-year fixed with conforming loan balances increased from 3.07% to 3.10%. Points rose from 0.32 to 0.46 (incl. origination fee) for 80% LTV loans.

  • Average 30-year rates for jumbo loan balances decreased from 3.41% to 3.35%. Points increased from 0.27 to 0.42 (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 6.8% in the week ending 18th September. In the week prior, the Index had fallen by 2.5%.

The Refinance Index rose by 9% from the previous week and was 25% higher than the same week a year ago. In the week prior, the index had declined by 4%.

The refinance share of mortgage activity increased from 62.8% to 64.3%. In the week prior, the share had slipped from 63.1% to 62.8%.

According to the MBA,

  • Mortgage application activity remained strong last week, even as the 30-year fixed-rate mortgage and 15-year fixed-rate mortgage increased to their highest level since late August.

  • Purchase applications were up over 25% from a year ago.

  • Demand for higher-balance loans pushed the average purchase loan size to another record high.

  • The strong interest in homebuying observed in the summer has carried over to the fall.

  • Despite the uptick in rates, refinance applications increased by around 9% and were almost 86% higher than last year.

For the week ahead

It’s a busy 1st half of the week on the U.S economic calendar.

Key stats include September consumer confidence, ADP nonfarm employment change, and finalized 3rd quarter GDP numbers.

Barring deviation from prelims, expect the consumer confidence and ADP numbers to have the greatest impact.

On the monetary policy front, FOMC members are out in force during the week. Expect the markets to digest and respond to the chatter.

If that’s not enough, there’s the first U.S Presidential Election debate on Wednesday. With Biden holding a solid lead, it remains his to lose…

From elsewhere, stats from the Eurozone and China and COVID-19 updates and Brexit chatter will also influence.

This article was originally posted on FX Empire

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