US Mortgage Rates Fall for the Second Time in Eleven Weeks

In the week ending May 19, mortgage rates fell for the second time in eleven weeks.

30-year fixed rates declined by five basis points to 5.25%. 30-year fixed rates rose by 3 basis points in the week prior.

Year-on-year, 30-year fixed rates were up by 225 basis points.

30-year fixed rates were up by 31 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a busy first half of the week. NY Empire State Manufacturing, retail sales, and industrial production were in focus.

The stats were mixed, with the NY Empire State Manufacturing Index sliding from 24.6 to -11.6.

Industrial production figures for April were upbeat, easing some of the market angst over the economic outlook. Production rose by 1.1% in April.

Retail sales created some uncertainty, however. Retail sales rose by 0.9% in April, following a 1.4% increase in March.

On the monetary policy front, Fed Chair Powell caused a stir on Tuesday, talking of a willingness to move beyond neutral to curb inflation. The hawkish chatter wasn’t enough, however, to offset the effect of investor jitters towards the economic outlook on mortgage rates.

From China, industrial production and retail sales figures disappointed on Monday, setting the bearish tone.

Freddie Mac Rates

The weekly average rates for new mortgages, as of May 19, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates fell by five basis points to 5.25%. This time last year, rates stood at 3.00%. The average fee remained unchanged at 0.9 points.

• 15-year fixed rates declined by five basis points to 4.43% in the week. Rates were up by 214 basis points from 2.29% a year ago. The average fee remained unchanged at 0.9 points.

• 5-year fixed rates increased by ten basis points to 4.08%. Rates were up by 149 basis points from 2.59% a year ago. The average fee fell from 0.3 points to 0.2 points.

According to Freddie Mac,

• Mortgage volatility has picked up due to economic uncertainty, which has also weighed on purchase demand.
• Homebuilder sentiment has waned to the lowest level in close to two years.
• Rising costs are impacting builders, which could adversely impact builder sentiment further.

Mortgage Bankers’ Association Rates

For the week ending May 13, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances decreased from 5.53% to 5.49%. Points rose from 0.73 to 0.74 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA decreased from 5.37% to 5.32%. Points fell from 0.87 to 0.71 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 5.08% to 5.03%. Points rose from 0.42 to 0.61 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, decreased by 11%. The Index increased by 2.0% in the previous week.

The Refinance Index slid by 10% and was 76% lower than the same week one year ago. In the week prior, the Index declined by 2%.

The refinance share of mortgage activity increased from 32.4% to 33.0%. In the previous week, the share decreased from 33.9% to 32.4%.

According to the MBA,

• Mortgage applications fell for the first time in three weeks, pressured by the upswing in mortgage rates.
• Current mortgage rates also provide borrowers with little incentive to refinance.
• Purchase applications slid by 12% last week, with higher rates and a deteriorating affordability environment weighing.
• Uncertainty about the economic outlook and stock market volatility has also impacted buyer demand.

For the week ahead

It’s another relatively busy first half of the week ahead.

On Tuesday, US prelim private sector PMIs for May will draw plenty of attention. We expect plenty of market sensitivity to the services PMI as the markets assess economic conditions midway through the second quarter.

On Wednesday, core durable goods orders will also influence.