U.S Mortgage Rates Hit a New Record Low

Mortgage rates saw a 2^nd consecutive weekly decline to fall to a new record low in the week ending 6^th August.

The fall saw 30-year fixed rates slide by 11 basis points to a new all-time low 2.88% in the week ending 6^th August.

In the week prior, 30-year fixed rates had fallen by 2 basis points to 2.99%.

Compared to this time last year, 30-year fixed rates were down by 72 basis points.

30-year fixed rates were also down by 206 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the busier side through the 1^st half of the week.

Key stats included July’s private sector PMIs and ADP nonfarm employment change figures. June factory orders were also in focus in the week.

In July, the market’s preferred ISM Manufacturing PMI rose from 52.6 to 54.2. The more influential Non-Manufacturing ISM increased from 57.1 to 58.1.

While factory orders also impressed, rising by a further 6.2%, the ADP nonfarm employment change figures disappointed. In July, the ADP reported just a 167k increase, falling well short of a forecasted 1.5m increase.

While the stats were skewed to the positive, failure of lawmakers to deliver on the COVID-19 stimulus package weighed on Treasury yields. Dire labor market conditions added to the market angst, which left 10-year Treasury yields at close to record lows in the week.

Freddie Mac Rates

The weekly average rates for new mortgages as of 6^th August were quoted by Freddie Mac to be:

• 30-year fixed rates slid by 11 basis points to 2.88% in the week. Rates were down from 3.60% a year ago. The average fee remained unchanged at 0.8 points.

• 15-year fixed rates fell by 7 basis points to 2.44% in the week. Rates were down from 3.05% a year ago. The average fee increased from 0.7 points to 0.8 points.

• 5-year fixed rates declined by 4 basis points to 2.90% in the week. Rates were down by 46 points from last year’s 3.36%. The average fee remained unchanged at 0.4 points.

According to Freddie Mac,

• The resilience of the housing market continues as mortgage rates hit another all-time low.
• Potential buyers were on the rise amidst increasing purchasing power.
• Freddie Mac expects rates to stay low and continue to propel the purchase market forward.
• A lack of inventory, especially for entry-level homes, remains a barrier to entry, however.

Mortgage Bankers’ Association Rates

For the week ending 31^st July, rates were quoted to be:

• Average interest rates for 30-year fixed, backed by the FHA, remained unchanged at 3.27%. Points increased from 0.35 to 0.42 (incl. origination fee) for 80% LTV loans.
• Average interest rates for 30-year fixed with conforming loan balances decreased from 3.20% to 3.14%. Points rose from 0.37 to 0.39 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 3.52% to 3.51. Points increased from 0.30 to 0.33 (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, decreased by 5.1% in the week ending 31^st July. In the week prior, the index had decreased by 0.8%.

The Refinance Index slid by 7% and was 84% higher than the same week one year ago. In the week prior, the index had slipped by 0.4%.

The refinance share of mortgage activity decreased from 65.1% to 63.9% in the week ending 31^st July. In the week ending 24^th July, the share had increased from 64.8% to 65.1%.

According to the MBA,

• Mortgage rates dropped to another record low last week, falling below the previous record 3.14%.
• Refinance activity decreased but the current pace remains more than 80% higher than a year ago.
• The MBA forecast calls for rates to remain at these low levels, which will continue to spur strong refinance activity.
• Purchase applications also fell slightly but were still 20% higher than a year ago.
• The weak job market and tighter credit for government loans are constraining some first-time homebuyers.

For the week ahead

It’s a relatively quiet 1^st half of the week on the U.S economic calendar.

Key stats include JOLT’s job openings for June and inflation figures for July.

While we can expect some influence from the numbers, July’s nonfarm payroll and weekly jobless claims figures from last week will provide upward momentum.

Key, however, will be progress towards the U.S COVID-19 stimulus package…

On the geopolitical front, continued friction between the U.S and China will also influence yields.