U.S Mortgage Rates Bounce Back, Driven by Upbeat U.S Economic Data and Inflation

Mortgage rates rose for the 1^st time in 3-weeks, marking a 4^th increase in 6-weeks

The pickup in mortgage rates saw 30-year fixed break back through the 3% mark.

In the week ending 18^th November, 30-year fixed rates rose by 12 basis points to 3.10%.

Compared to this time last year, 30-year fixed rates were up by 38 basis points.

30-year fixed rates were still down by 184 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

Through the 1^st half of the week, retail sales figures impressed, in spite of the marked pickup in inflationary pressure.

In October, core retail sales rose by 1.7%, with retail sales also up 1.7%. Retail sales had risen by 0.5% in September, with core retail sales having risen by 0.70%.

Freddie Mac Rates

The weekly average rates for new mortgages as of 18^th November were quoted by Freddie Mac to be:

• 30-year fixed rates jumped by 12 basis points to 3.10% in the week. This time last year, rates had stood at 2.72%. The average fee remained unchanged at 0.7 points.

• 15-year fixed also jumped by 12 basis points to 2.39% in the week. Rates were up by 11 basis points from 2.28% a year ago. The average fee remained unchanged at 0.6 points.

• 5-year fixed rates slipped by 4 basis point to 2.49%. Rates were down by 36 points from 2.85% a year ago. The average fee remained fell from 0.4 points to 0.3 points.

According to Freddie Mac,

• The combination of rising inflation and consumer spending drove mortgage rates higher.
• Shoppers looking to buy a home are fueling strong demand while ongoing inventory shortages are not improving in the presence of higher home prices.

Mortgage Bankers’ Association Rates

For the week ending 12^th November, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances increased from 3.16% to 3.20%. Points remained increased from 0.34 to 0.43 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA rose from 3.18% to 3.23%. Points increased from 0.31 to 0.41 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances remained unchanged at 3.26%. Points rose from 0.32 to 0.39 (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, fell by 2.8% in the week ending 12^th November. In the previous week, the index had increased by 5.5%.

The Refinance Index fell by 5% and was 31% lower than the same week a year ago. In the week prior, the index had risen by 7%.

The refinance share of mortgage activity decreased from 63.5% to 62.9%. In the previous week, the share had increased from 61.9% to 63.5% of total applications.

According to the MBA,

• Refinance applications declined for the 7^th time in 8-weeks, as mortgage rates moved higher after 2-weeks of declines.
• Activity has been particularly sensitive to rate movements.
• Purchase applications increased for both conventional and government loan segments.
• Household demand continues to show resilience at a time when home buying activity typically slows.
• The 2^nd straight increase in purchase applications suggests that stronger sales activity may continue in the weeks to come.
• Despite elevated demand, purchase applications were 5.7% lower than a year ago.

For the week ahead

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

On Tuesday, prelim November private sector PMIs are due out, with the services PMI the key stat of the day.

With the U.S markets closed on Thursday; a particularly busy economic calendar will also influence on Wednesday.

Key stats include 3^rd quarter GDP, personal spending, inflation, and core durable goods orders.

On the monetary policy front, the FOMC meeting minutes will also draw plenty of attention.

Away from the economic calendar, however, COVID-19 news from Europe will also need considering.