U.S Mortgage Rates Make it 7 in a Row as Economic Data Fuels Optimism

Mortgage rates were on the rise for a 7^th consecutive week in the week ending 1^st April. Following an 8-basis points rise from the week prior; 30-year fixed rates rose by a further 1 basis point to 3.18%.

Compared to this time last year, 30-year fixed rates were down by just 15 basis points.

30-year fixed rates were still down by 176 basis points since November 2018’s last peak of 4.94%.

Notably, however, it was just the fifth plus 3% week since July of last year and the highest rate since 10^th June 2020, where 30-year fixed rates stood at 3.21%.

Economic Data from the Week

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

On the economic data front, consumer confidence, Chicago PMI, and employment figures were in focus.

The stats were skewed to the positive.

Consumer confidence improved further in March, with the CB Consumer Confidence Index rising from 90.4 to 109.7.

ADP nonfarm employment change figures were also positive. The ADP reported a 517k increase in nonfarm payrolls ahead of the government’s official figures on Friday. The jump came off the back of a 176k rise in February.

Adding to the bullish sentiment towards the U.S economy was a rise in the Chicago PMI from 59.5 to 66.3 in March.

Other stats included housing sector data.

Pending home sales took a hit in February, tumbling by 10.6%, while house prices saw a marked increase in January.

The S&P/CS HPI Composite rose by 11.0%, year-on-year, in January. In December, house prices had risen by just 0.2%.

Away from the economic calendar, the U.S government’s spending plans added support for riskier assets in the week.

Freddie Mac Rates

The weekly average rates for new mortgages as of 1^st April were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 1 basis point to 3.18% in the week. This time last year, rates had stood at 3.33%. The average fee held steady at 0.7 points.

• 15-year fixed rates held steady at 2.45% in the week. Rates were down by 37 basis points from 2.82% a year ago. The average fee held steady at 0.6 points.

• 5-year fixed rates also held steady at 2.84%. Rates were down by 56 points from 3.40% a year ago. The average fee rose from 0.2 points to 0.3 points.

According to Freddie Mac,

• In spite of low mortgage rates, there is evidence of a pullback by those looking to enter the housing market.
• Homebuyer demand has gone from 25% above pre-COVID levels at the start of the to 8% above pre-COVID levels today.
• Purchase demand has diminished compared with late May and early June 2020, when mortgage rates were at the same level.
• This confirms that the marginal buyer is feeling the affordability squeeze resulting from rising mortgage rates and house prices.

Mortgage Bankers’ Association Rates

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

• Average interest rates for 30-year fixed to conforming loan balances decreased from 3.36% to 3.33%. Points decreased from 0.42 to 0.39 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA decreased from 3.35% to 3.29%. Points fell from 0.41 to 0.34 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 3.40% to 3.34%. Points decreased from 0.43 to 0.31 (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 2.2% in the week ending 26^th March. In the previous week, the index had decreased by 2.5%.

The Refinance Index fell by 3% from the previous week and was 32% lower than the same week one year ago. The index had fallen by 4% in the week prior.

In the week ending 26^th March, the refinance share of mortgage activity declined from 60.9% to 60.6%. In the previous week, the share had decreased from 62.9% to 60.9%.

According to the MBA,

• After 7 consecutive weeks of increasing mortgage rates, the 30-year fixed rate declined by 3 basis points.
• In spite of the decline, rates remained almost half a percentage point higher than the start of this year.
• Mortgage applications for refinances and home purchases both declined.
• Purchase activity was still convincingly higher than the pandemic-induced drop seen a year ago.
• Many prospective buyers this spring are feeling the effects of higher rates and rapidly accelerating home prices.
• Record low inventory is pushing home-price growth at double the rate from a year ago and above the 10% growth rates seen in 2005.
• The housing market is in desperate need of more inventory to cool price growth and preserve affordability.
• Additionally, higher mortgage rates continue to shut down refinance activity.

For the week ahead

It’s another relatively quiet first half of the week on the U.S economic calendar. Key stats include ISM Non-Manufacturing PMI, factory orders, and JOLTs job openings.

Expect the ISM Non-Manufacturing PMI figures to have the greatest impact on U.S Treasury yields.

Away from the economic calendar, chatter from Capitol Hill on spending, FOMC member commentary, and geopolitics will also influence.