U.S Mortgage Rates Fall Further Back from the 3% Mark

Mortgage rates fell once more in the week ending 8^th July

Following a 4 basis points decline from the previous week, 30-year fixed rates decreased by 8 basis points to 2.90%.

Since 21^st April, 30-year mortgage rates had risen just once beyond the 3% mark before the current pullback.

Compared to this time last year, 30-year fixed rates were down by 13 basis points.

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

Economic Data from the Week

It was a quiet first half of the week on the U.S economic calendar.

Key stats included the all-important ISM Non-Manufacturing PMI figures for June and JOLT’s job openings for May.

It was a mixed start of numbers for the markets, with the ISM Non-Manufacturing PMI falling from 64.0 to 60.1.

By contrast, job openings rose from 9.193m to 9.209m in May. With the FOMC meeting minutes in focus mid-week, however, the stats had a muted impact on the markets.

A mixed set of signals from the FED that talked of patience but the need to discuss tapering of the asset purchasing program weighed on yields.

Market concerns over the pace of the global economic recovery also weighed on riskier assets before a Friday rebound.

Freddie Mac Rates

The weekly average rates for new mortgages as of 8^th July were quoted by Freddie Mac to be:

• 30-year fixed rates fell by 8 basis points to 2.90% in the week. This time last year, rates had stood at 3.03%. The average fee remained steady at 0.6 points.

• 15-year fixed declined by 6 basis points to 2.20% in the week. Rates were down by 31 basis points from 2.51% a year ago. The average fee remained unchanged 0.7 points.

• 5-year fixed rates slipped by 2 basis point to 2.52%. Rates were down by 50 points from 3.02% a year ago. The average fee fell from 0.3 points to 0.2 points.

According to Freddie Mac,

• Mortgage rates decreased in response to a blip in U.S Treasury yields.
• While mortgage rates tend to follow Treasury yields closely, other factors can also influence, including labor markets.
• We expect economic growth to gradually drive interest rates higher.
• Homebuyers and refinance borrowers still have an opportunity to take advantage of 30-year rates that are expected to continue to hover around 3%.

Mortgage Bankers’ Association Rates

For the week ending 2^nd July, the rates were:

• Average interest rates for 30-year fixed to conforming loan balances decreased from 3.20% to 3.15%. Points decreased from 0.39 to 0.38 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA decreased from 3.19% to 3.17%. Points fell from 0.34 to 0.32 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 3.23% to 3.20%. Points decreased from 0.33 to 0.28 (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 1.8% in the week ending 2^nd July. In the week prior, the index had declined by 6.9%.

The Refinance Index fell by 2% and was 8% lower than the same week one year ago. The Index had declined by 8% in the previous week.

In the week ending 2^nd July, the refinance share of mortgage activity had fallen from 61.9% to 61.6%. The share had decreased from 62.5% to 61.9% in the previous week.

According to the MBA,

• Mortgage application activity fell for the 2^nd consecutive week, reaching the lowest level since the beginning of 2020.
• Even as mortgage rates declined, both purchase and refinance applications decreased.
• Treasury yields have been volatile despite mostly positive economic news, including last week’s June jobs report, which pointed to further improvement in the labor market.
• While mortgage rates have fallen, many borrowers previously refinanced at even lower rates.
• Refinance applications have trended lower than 2020 levels for the past 4-months.

For the week ahead

It’s another quiet first half of the week. Following a quiet end to the previous week, inflation figures for June will draw interest on Tuesday and Wednesday.

With concerns over inflation lingering, expect plenty of influence from the numbers.

Away from the economic calendar, COVID-19 news and FOMC member chatter will also need monitoring in the week.