It was just a 2nd weekly increase in 7-weeks for U.S mortgage rates in the week ending 20th May. Reversing a 2 basis points fall from the week prior, 30-year fixed rates rose by 6 basis points to 3.00%.
Compared to this time last year, 30-year fixed rates were down by 24 basis points.
30-year fixed rates were still down by 194 basis points since November 2018’s last peak of 4.94%.
Notably, mortgage rates returned to the 3% mark for the first time in five weeks.
Economic Data from the Week
It was a quiet first half of the week on the U.S economic calendar.
Key stats included NY Empire State Manufacturing figures for May and housing sector data for April.
In May, the NY Empire State Manufacturing Index fell from 26.3 to 24.3.
Housing sector numbers were also skewed to the negative.
Building permits rose by a modest 0.3% in April, following a 1.7% increase in March. Housing starts slid by 9.5%, following a 19.8% surge in March.
While the stats were on the lighter side, the FOMC meeting minutes on Wednesday supported a pickup in U.S Treasury yields.
Talk amongst members of a review of monetary policy, in light of the economic rebound, drove yields northwards.
Freddie Mac Rates
The weekly average rates for new mortgages as of 20th May were quoted by Freddie Mac to be:
- 30-year fixed rates rose by 6 basis point to 3.00% in the week. This time last year, rates had stood at 3.24%. The average fee fell from 0.7 to 0.6 points.
- 15-year fixed increased by 3 basis points to 2.29% in the week. Rates were down by 41 basis points from 2.70% a year ago. The average fee rose from 0.6 points to 0.7 points.
- 5-year fixed rates remained unchanged at 2.59%. Rates were down by 58 points from 3.17% a year ago. The average fee remained unchanged at 0.3 points.
According to Freddie Mac,
- Following a run up over the first few months of the year, rates have paused and hovered at around the 3% mark since March.
- While the low-rate environment is positive for buyers, a shortage of homes for sale remains an issue.
- The lack of housing supply has been compounded by labor disruptions and expensive building materials that are pushing new home prices northwards.
Mortgage Bankers’ Association Rates
For the week ending 14th May, the rates were:
- Average interest rates for 30-year fixed to conforming loan balances increased from 3.11% to 3.15%. Points increased from 0.32 to 0.36 (incl. origination fee) for 80% LTV loans.
- Average 30-year fixed mortgage rates backed by FHA increased from 3.07% to 3.13%. Points fell from 0.34 to 0.30 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances increased from 3.27% to 3.31%. Points decreased from 0.34 to 0.27 (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, increased by 1.2% in the week ending 14th May. In the week prior, the index had risen by 2.1%.
The Refinance Index rose by 4% and was 2% lower than the same week a year ago. The Index had risen by 3% in the week prior.
In the week ending 14th May, the refinance share of mortgage activity increased from 61.3% to 63.3%. The share had risen from 61.0 to 61.3% in the previous week.
According to the MBA,
- All loan types hit their highest level in two weeks, though were still lower than levels reported in late March and early April.
- Ongoing volatility in refinance applications is likely if rates continue to oscillate around current levels.
- There continues to be strong demand for buying a home, but persistent supply shortages are constraining purchase activity.
- Building shortages and higher costs are making it more difficult to increase supply.
- As a result, home prices and average purchase loan balances continue to rise.
- The average purchase application reached $411,400 – the highest since February.
For the week ahead
It’s another quiet first half of the week on the U.S economic calendar. Consumer confidence figures for May are due out on Tuesday. A pickup in consumer confidence would support a further increase in yields following the latest FOMC meeting minutes.
On the monetary policy front, FOMC member chatter could also influence yields in the week ahead. With talk of a review of the FED’s current stance on monetary policy, the markets will be looking to get a sense of where the balance lies between the hawks and the doves.