U.S Mortgage Rates Fall Once More as Concerns over COVID-19 Peg Back Yields

Mortgage rates resumed their downward trend, with rates falling for the 5^th time in 6-weeks.

In the week ending 5th August, 30-year fixed rates fell by 3 basis points to 2.77%. Mortgage rates had risen by 2 basis points in the week prior.

30-year mortgage rates have risen just once beyond the 3% Since 21^st April.

Compared to this time last year, 30-year fixed rates were down by 11 basis points.

30-year fixed rates were still down by 217 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

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

Economic data included private sector PMI and nonfarm payroll figures for July.

It was a mixed bag on the economic data front.

While manufacturing sector growth slowed in July, service sector activity increased sharply at the start of the quarter.

The ISM Manufacturing PMI fell from 60.6 to 59.6, while the ISM Non-Manufacturing PMI jumped from 60.1 to 64.1.

While the sharp increase in service sector activity would normally put pressure on the FED, mid-week nonfarm payrolls disappointed.

According to the ADP, nonfarm payrolls increased by 330k in July, falling well short of a forecasted 715k jump. A marked improvement in labor market conditions would be needed for the FED to begin a more meaningful debate on policy change.

NFP numbers from Friday painted a very different picture to the ADP numbers mid-week…

Freddie Mac Rates

The weekly average rates for new mortgages as of 5^th August were quoted by Freddie Mac to be:

• 30-year fixed rates fell by 3 basis points to 2.77% in the week. This time last year, rates had stood at 2.88%. The average fee fell from 0.7 points to 0.6 points.

• 15-year fixed remained unchanged at 2.10% in the week. Rates were down by 34 basis points from 2.45% a year ago. The average fee fell from 0.7 points to 0.6 points.

• 5-year fixed rates fell by 5 basis point to 2.40%. Rates were down by 50 points from 2.90% a year ago. The average fee rose from 0.3 points to 0.4 points.

According to Freddie Mac,

• Treasury yields drifted lower as a result of global uncertainty over the continued spread of the Delta variant.
• 30-year fixed rates fell back to where it stood at the start of the current year, with 15-year fixed at its historic low.
• This bodes well for those looking to refinance, renovate, or even purchase a new home.

Mortgage Bankers’ Association Rates

For the week ending 30^th July, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances decreased from 3.01% to 2.97%. Points decreased from 0.34 to 0.33 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 3.03% to 3.08%. Points fell from 0.35 to 0.29 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 3.11% to 3.12%. Points increased from 0.27 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, fell 1.7% in the week ending 30^th July. In the week prior, the Index had increased by 5.7%.

The Refinance Index decreased 2% and was 3% lower than the same week a year ago. The index had increased 9% in the previous week.

In the week ending 30^th July, the refinance share of mortgage activity increased from 67.5% to 67.6%. The share had risen from 64.9% to 67.5% in the week prior.

According to the MBA,

• Interest rates drifted lower globally last week, as markets assessed the latest concerns regarding the delta variant.
• 30-year mortgage rates dropped below 3% in the MBA survey for the first time since February.
• The decline presented an opportunity for many homeowners yet to refinance to lower their rate and payments.
• Refinance application volume decreased slightly, following an 11% jump from the week prior.
• Purchase application volume fell again, reflecting the ongoing lack of inventory that continues to drive house price appreciation.

For the week ahead

It’s a quieter first half of the week. Economic data includes JOLTs job openings and inflation figures.

Expect inflation to have the greatest impact on yields. We also expect the previous week’s nonfarm payrolls to also provide yields with continued direction early in the week.

Away from the economic calendar, COVID-19 news updates will remain a key driver, however.