Mortgage rates held steady in the week ending 15th August. 30-year fixed rates held at 3.60% following a 15 basis point fall to 3.60% in the week ending 8th August.
The hold left 30-year rates at their 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 93 basis points.
More significantly, 30-year fixed rates are down by 134 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 1st half of the week were on the lighter side once more.
A lack of stats on Monday left the markets to focus on the U.S – China trade war and the global economy ahead of inflation figures on Tuesday.
The stats on Tuesday provided some much-needed support, with the annual rate of core inflation picking up from 2.1% to 2.2% in July.
Export and import price index numbers had a muted impact on Wednesday.
Of greater significance in the week was the U.S administration’s announcement to delay next month’s tariffs on certain goods from China.
Sliding U.S Treasury yields failed to place further downward pressure on mortgage rates in the week, however. The slide coming off the back of rising fear of a global economic recession.
Freddie Mac Rates
The weekly average rates for new mortgages as of 15th August were quoted by Freddie Mac to be:
- 30-year fixed rates held steady at 3.60% in the week. Rates were down from 4.53% from a year ago. The average fee fell from 0.6 points to 0.5 points.
- 15-year fixed rates increased by 2 basis points to 3.07% in the week. Rates were down from 4.01% from a year ago. The average fee also held steady at 0.5 points.
- 5-year fixed rates fell by 1 basis point to 3.35% in the week. Rates were down by 52 basis points from last year’s 3.87%. The average fee held steady at 0.3 points.
According to Freddie Mac, the financial markets continued to warn of an impending recession. In spite of the alarm bells, mortgage demand reached a 3-year high in the week. Freddie Mac noted that the recent slide in mortgage rates led to a spike in refinancing activity. Refinancing is expected to increase household cash flow to support spending. Also of note was a 7% rise, year-on-year, in purchase demand.
Mortgage Bankers’ Association Rates
For the week ending 9th August, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.86% to 3.81%. Points decreased from 0.38 to 0.29 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances fell from 4.01% to 3.93%. Points decreased from 0.37 to 0.35 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances declined from 3.96% to 3.88. Points decreased from 0.26 to 0.24 (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, surged by 21.7% in the week ending 9th August. The bounce came off the back of a 5.3% increase in the week ending 2nd August.
The Refinance Index surged by 37% to the highest level since Jul-16 in the week ending 9th August. Year-on-year, the index was by 196%. The surge followed a 12% increase from the previous week.
The share of refinance mortgage activity increased from 53.9% to 61.4%, following on from a rise from 50.5% to 53.9% in the week prior.
According to the MBA, fears of an escalating trade war, together with economic and geopolitical concerns, led to a slide in U.S Treasury yields.
In the week, the MBA also released its National Delinquency Survey. According to the MBA report,
- The delinquency rate for mortgage loans on one-to-four unit residential properties rose to 4.53% of all loans outstanding in the 2nd
- Quarter-on-quarter, the delinquency rate was up by 11 basis points and up by 17 basis points year-on-year.
- In spite of the rise, the foreclosure inventory rate stood at 0.9%, the lowest level since the 4th quarter of 1995.
The upside in the delinquency rate came despite strong labor market conditions. According to the MBA, adverse weather conditions may have contributed to the rise in delinquency rates. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, stood at 1.95%. Quarter-on-quarter, the rate was down by 1 basis point and down by 35 basis points year-on-year.
For the week ahead
It’s a particularly quiet first half of the week ahead.
Key stats due out of the U.S are limited to July existing home sales figures due out on Wednesday. We expect the numbers to have a muted impact on Treasury yields and mortgage rates. The battle of inventories against sliding mortgage rates continues to leave the numbers mixed of late.
Outside of the stats, the FOMC meeting minutes due out on Wednesday will have a material impact, however.
The markets are expecting further support from the FED. Economic data suggests otherwise, however…
Outside of the numbers
On the geopolitical front, expect trade war chatter to also be a factor on the week. China declined to respond in kind to Trump’s latest olive branch, which could lead to a further escalation in the week ahead.
This article was originally posted on FX Empire
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