U.S Mortgage Rates Break Back Through to 3% as Treasury Yields Climb

Mortgage rates were on the rise for a 3^rd consecutive week in the week ending 4^th March. Following a 16-basis points jump from the week prior; 30-year fixed rates rose by a further 5 basis points to 3.02%.

Compared to this time last year, 30-year fixed rates were down by 27 basis points.

30-year fixed rates were also down by 192 basis points since November 2018’s last peak of 4.94%.

Notably, however, it was the first plus 3% week since July of last year.

Economic Data from the Week

It was a relatively busy first half of the week on the U.S economic calendar. ISM Manufacturing and Non-Manufacturing PMI and ADP nonfarm employment figures for February were in focus.

The stats were skewed to the negative in the week.

While the ISM Manufacturing PMI was on the rise in February, service sector growth slowed according to the ISM survey.

The all-important ISM Non-Manufacturing PMI fell from 58.7 to 55.3 in February.

ADP numbers also disappointed, with the ADP reporting a 117k increase in nonfarm payrolls. In January, the ADP had reported a 195k increase in nonfarm payrolls.

While the stats were mixed, a continued rise in U.S 10-year Treasury yields delivered the upside in 30-year fixed rates in the week.

Freddie Mac Rates

The weekly average rates for new mortgages as of 4^th March were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 5 basis points to 3.02% in the week. This time last year, rates had stood at 3.29%. The average fee held steady at 0.6 points.

• 15-year fixed rates remained unchanged at 2.34% in the week. Rates were down by 45 basis points from 2.79% a year ago. The average fee rose from 0.6 points to 0.7 points.

• 5-year fixed rates slid by 26 basis point 2.73%. Rates were down by 45 points from 3.18% a year ago. The average fee rose from 0.1 points to 0.3 points.

According to Freddie Mac,

• Since reaching a low in January, mortgage rates have risen by more than 30 basis points, weighing on purchase demand.
• While purchase activity remains high, it has cooled off over the last few weeks.
  Currently, purchase activity is comparable to pre-pandemic levels.
• The rise in mortgage rates over the next couple of months is likely to be more muted compared to the last few weeks.
• Freddie Mac expects a strong spring sales season.

Mortgage Bankers’ Association Rates

For the week ending 26^th February, the rates were:

• Average interest rates for 30-year fixed to conforming loan balances increased from 3.08% to 3.23%. Points increased from 0.46 to 0.48 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 3.00% to 3.19%. Points fell from 0.33 to 0.30 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances rose from 3.23% to 3.33%. Points decreased from 0.43 to 0.41 (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 just 0.50% in the week ending 26^th February. In the previous week, the index had fallen by 11.4%.

The Refinance Index increased by 0.10% and was just 7% higher than the same week a year ago. The index had fallen by 11.0% in the week prior.

In the week ending 26^th February, the refinance share of mortgage activity decreased from 68.5% to 67.5%. in the previous week, the share had fallen from 69.3% to 68.5%.

According to the MBA,

• 30-year fixed rates experienced its largest single-week increase in almost a year and the highest since Jul-2020.
• The overall share of refinances declined for the 4^th consecutive week.
• Spring buying season is approaching for the housing market, as market expectations of strong growth and higher inflation drove mortgage rates northwards.

For the week ahead

It’s a relatively quiet first half of the week on the U.S economic calendar. Key stats include February inflation figures.

From the week prior, we would expect February’s nonfarm payrolls and continued uptrend in U.S Treasury yields to also influence.

From elsewhere, trade data from China and chatter from the National People’s Congress will also influence yields and mortgage rates.