U.S Mortgage Rates – Rates Steadied Ahead of the June NFP Numbers

Mortgage rates were on the rise for just the 2^nd week in the last 8. In the week ending 3^rd July, 30-year fixed rates rose by 2 basis points to 3.75%, partially reversing an 11 basis point fall from the previous week. That left 30-year rates close the lowest level since late 2016 according to figures released by Freddie Mac.

Compared to this time last year, 30-year fixed rates were down by 77 basis points.

More significantly, 30-year fixed rates are down by 119 basis points since last November’s most recent peak of 4.94%.

Economic Data from the Week

Key stats out of the U.S through the 1^st half of the week were on the heavier side.

June manufacturing sector PMI numbers provided direction at the start of the week. An upward revision to the Markit survey prelim numbers saw the PMI rise from 50.5 to 50.6 in June. For the market’s preferred ISM survey, whilst activity eased from May, the PMI also came in ahead of forecast.

With a lack of stats on Tuesday, it was then down to the all-important ADP nonfarm employment change figures and ISM non-manufacturing PMI numbers on Wednesday.

According to the ISM survey, service sector activity saw slower growth in June, with the ADP reporting 102k jobs added. Forecasts were employment to rise by 140k.

Adding to the negative sentiment towards the U.S economy was a widening in the U.S trade deficit and a 0.7% fall in factory orders.

In spite of the negatively skewed stats out of the U.S, an agreement between the U.S and China at the G20 Summit to progress on trade talks provided support.

Freddie Mac Rates

The weekly average rates for new mortgages as of 3^rd July were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 2 basis points to 3.75% in the week. Rates were down from 4.52% from a year ago. The average fee rose from 0.5 to 0.6 points.
• 15-year fixed rates rose by 2 basis point to 3.18% in the week. Rates were down from 3.99% from a year ago. The average fee held steady at 0.5 points.
• 5-year fixed rates increased by 6 basis points to 3.45% in the week. Rates were down by 29 basis points from last year’s 3.74%. The average fee held steady at 0.4 points.

Labour market conditions and consumer confidence continue to support the housing market outlook near-term…

Mortgage Bankers’ Association Rates

For the week ending 28^th June, rates were quoted to be:

• Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.01% to 3.97%. Points decreased from 0.36 to 0.30 (incl. origination fee) for 80% LTV loans.
• Average interest rates for 30-year fixed with conforming loan balances increased from 4.06% to 4.07%. Points increased from 0.35 to 0.36 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances held steady at 4.00%. Points increased from 0.24 to 0.25 (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 0.1% in the week ending 28^th June. The fall followed a 1.3% rise in the week ending 21^st June.

The Refinance Index fell by 1% in the week ending 28^th June. The Index rose by 3% in the previous week ending 21st June.

The share of refinance mortgage activity decreased from 51.5% to 51.0%, following an increase from 50.2% to 51.5% in the week prior.

According to the MBA, purchase activity was on the rise, supported by a strong job market and the low mortgage rate environment.

For the week ahead

While it’s a busy week ahead for the Greenback, stats through the 1^st half of the week are on the lighter side.

Economic data is limited to May’s JOLT’s job openings that are unlikely to have a material impact on yields.

Last week’s nonfarm payroll figures will have a material impact, however, with nonfarm jumping by 224K in June. The figures dampened the chances of a rate cut later this month, in spite of a string of economic indicators reflecting weaker growth.

Outside of the stats, the FOMC meeting minutes on Wednesday and FED Chair Powell’s testimony to Congress will be the key drivers.

On the geopolitical front, the markets will be looking for any progress on the U.S – China trade talks and there’s also Iran to consider.