In the week ending July 1, mortgage rates fell for a second consecutive week.
30-year fixed rates tumbled by 40 basis points, following an 11-basis point decline from the previous week to end the week at 5.3%.
Year-on-year, 30-year fixed rates were up by 240 basis points and up by 36 basis points since November 2018’s previous peak of 4.94%.
Economic Data from the Week
In a shortened week, private sector activity and JOLTs job openings were in focus ahead of June nonfarm payroll numbers on Friday.
The stats eased immediate market concerns of a recession, with labor market conditions and private sector activity showing no signs of weakening.
In June, the all-important ISM Non-Manufacturing PMI slipped from 55.9 to 55.3 versus a forecasted 54.3.
While the ISM number was positive, less hawkish-than-expected FOMC meeting minutes on Wednesday pegged back yields.
The FOMC meeting minutes highlighted the risk of rate hikes having a ‘larger-than-expected effect on economic growth.’ Prior to the minutes, the markets had priced in a 75-basis point rate hike for July. However, the minutes revealed that participants judged a 50 or 75 basis point increase as appropriate.
Freddie Mac Rates
The weekly average rates for new mortgages, as of July 7, 2022, were quoted by Freddie Mac to be:
- 30-year fixed rates slumped by 40 basis points to 5.30%. This time last year, rates stood at 2.90%. The average fee fell from 0.9 points to 0.8 points.
- 15-year fixed rates slid by 38 basis points to 4.45% in the week. Rates were up by 225 basis points from 2.20% a year ago. The average fee fell from 0.9 points to 0.8 points.
- 5-year fixed rates tumbled by 31 basis points to 4.19%. Rates were up by 167 basis points from 2.52% a year ago. The average fee increased from 0.3 points to 0.4 points.
According to Freddie Mac,
- 30-year fixed mortgage rates fell by half a percent in the last two weeks, weighed by fears of a recession.
- The pullback delivers minor homebuyer relief.
- A continued slowdown in house price growth, however, stemming from low affordability and an expected economic slowdown, would continue to support a normalization in the housing market.
Mortgage Bankers’ Association Rates
For the week ending July 1, 2022, the rates were:
- Average interest rates for 30-year fixed with conforming loan balances decreased from 5.84% to 5.74%. Points rose from 0.64 to 0.65 (incl. origination fee) for 80% LTV loans.
- Average 30-year fixed mortgage rates backed by FHA fell from 5.62% to 5.60%. Points declined from 1.15 to 0.89 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances decreased from 5.42% to 5.28%. Points increased from 0.28 to 0.44 (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 5.4% in the week ending July 1. The index increased by 0.7% in the week prior.
The Refinance Index slid by 8% and was 78% lower than the same week one year ago. In the previous week, the Index increased by 2%.
The refinance share of mortgage activity declined from 30.3% to 29.6%. In the previous week, the share increased from 29.7% to 30.3%.
According to the MBA,
- Mortgage rates fell for a second consecutive week, weighed by concerns over an economic slowdown.
- While up for the current year, mortgage rates are down 24 basis points over the last two weeks.
- However, rates are significantly higher than a year ago, leaving home purchase and refinance applications under pressure.
- Affordability and low inventory continue to limit purchase activity.
For the week ahead
It is a quiet week ahead on the US economic calendar. There are no stats for the markets to consider ahead of US inflation figures on Wednesday.
Following last week’s less hawkish-than-expected FOMC meeting minutes, another spike in inflation would drive yields and mortgage rates higher.
June nonfarm payrolls impressed on Friday, delivering uncertainty over how the Fed will respond next week. The upbeat payroll numbers and another spike in inflation could force the FED to deliver a 75-basis point rate hike.