Mortgage rates hit reverse in the week ending 6th December, the fall coming off the back of a slide in market risk appetite that weighed heavily on the U.S and global equity markets. 30-year fixed rates eased back to 4.75% according to Freddie Mac, providing some much-needed respite to prospective homebuyers who have been faced with the combination of both rising mortgage rates and house prices.
Through Thursday, the Dow was down 2.31% and it would have been far worse had there not been a major rebound on the day, the Dow has dropped as much as 784.85 points before recovering to limit the loss to just 79.4 points on the day.
News of Hua Wei CFO Meng’s arrest contributed to the negative sentiment, with market uncertainty over what had actually been agreed between Trump and Xi ending in a rabbit in headlights moment, the arrest raising significant doubts on the Chinese being willing to do anything until her release.
On the economic data front, a pickup in private sector activity in November, according to the ISM surveys failed to ease fears of an economic slowdown, with the talk of yield curve inversions and some hawkish FOMC member chatter offsetting any positive stats that were released through the week.
Freddie Mac weekly average rates for new mortgages as of 6th December were quoted to be:
- 30-year fixed rate loan remained fell from 4.81% to 4.75% in the week, while up from 3.94% a year ago. The average fee remained unchanged at 0.5 points.
- 15-year fixed rates fell from 4.25% to 4.21% in the week, while up from 3.36% from a year ago. The average fee remained unchanged at 0.4 points.
- 5-year fixed rates decreased from 4.12% to 4.07% in the week, while up from last year’s 3.35%. The average fee held steady at 0.3 points.
Mortgage Bankers’ Association Rates for the week ending 30th November were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, decreased from 5.11% to 5.05%, with points with points decreasing from 0.63 to 0.62 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances decreased from 5.12 to 5.08, with points easing from 0.46 to 0.44 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances remained increased from 4.88% to 4.89%, with points easing from 0.31 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, increased by 2.0% in the week ending 30th November, following on from the previous week’s 5.5% jump, week-on-week.
The Refinance Index rose by 6%, in the week ending 30th November partially reversing the previous week’s 1% rise, with the share of refinancing mortgages increasing from 37.9% to 40.4%, reversing the recent downward trend in the share of refinancing mortgages.
The MBA noted that a slide in U.S Treasury yields, attributed to concerns over slowing global economic growth and uncertainty over U.S and China trade pinned back mortgage rate to support the continued uptick in applications.
A downward trend in mortgage rates saw purchase and refinance loan applications rise by 10% and by 7% respectively since the week prior to the Thanksgiving holiday. The MBA also noted that the average loan size for purchase applications fell from $313,000 to $298,000, the lowest since Dec-17, possibly a reflection of fewer jumbo borrowers or more first-time buyers entering to the market.
For the week ahead, it’s another busy week on the data front, with key stats including November inflation and retail sales figures, together with December prelim private sector numbers, the combination of which will give the markets an idea of where the 4th quarter GDP number is heading.
While the stats will have some influence, it’s ultimately going to boil down to the impact of geopolitical risk on Treasury yields, Tuesday’s Brexit vote and U.S – China trade war rhetoric likely to be the main areas of focus.
Prospective home buyers may be relishing the reversal in mortgage rates, but it could come at a price should economic indicators begin to deteriorate at a more rapid pace that could begin to weigh on the tight labor market conditions that have been enjoyed by many.
This article was originally posted on FX Empire
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