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Mortgage Rates at sub-3% for a Third Consecutive Week

Mortgage rates fell for a 4th week in 5-weeks in the week ending 6th May. Reversing a 1 basis point rise from the week prior, 30-year fixed rates fell by 2 basis points to 2.96%.

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

30-year fixed rates were still down by 198 basis points since November 2018’s last peak of 4.94%.

Notably, mortgage rates remained below prior the 3% mark for a 3rd consecutive week.

Economic Data from the Week

It was busy first half of the week on the U.S economic calendar.

Key stats included private sector PMI numbers for April, factory orders and trade data, and ADP nonfarm employment change figures.

The stats were skewed to the negative, with the market’s favored ISM Non-Manufacturing PMI falling from 63.7 to 62.7.

Manufacturing sector growth also softened in April, with the ISM Manufacturing PMI falling from 64.7 to 60.7

In March, the U.S trade deficit widened from $70.5bn to $74.4bn, while factory orders rose by a weaker than expected 1.1%.

Also falling short of forecasts was a 742k increase in nonfarm employment according to the ADP. Economists had forecast an 800k rise.

The weaker stats coupled with the FED’s assurances of low for longer pegged back Treasury yields and mortgage rates.

Freddie Mac Rates

The weekly average rates for new mortgages as of 6th May were quoted by Freddie Mac to be:

  • 30-year fixed rates fell by 2 basis point to 2.96% in the week. This time last year, rates had stood at 3.26%. The average fee fell from 0.7 to 0.6 points.
  • 15-year fixed decreased by 1 basis point to 2.30% in the week. Rates were down by 43 basis points from 2.73% a year ago. The average fee decreased from 0.7 points to 0.6 points.
  • 5-year fixed rates rose by 6 basis points to 2.70%. Rates were down by 47 points from 3.17% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • Mortgage rates have remained under 3% for 3 consecutive weeks.
  • Consumer income and spending are on the rise, leading to a pickup in economic growth.
  • The combination of low and stable rates, together with an improving economy, is good for homebuyers.
  • This is also a positive for homeowners who may have missed previous opportunities to refinance and increase monthly cash flow.

Mortgage Bankers’ Association Rates

For the week ending 30th April, the rates were:

  • Average interest rates for 30-year fixed to conforming loan balances increased from 3.17% to 3.18%. Points increased from 0.30 to 0.34 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA increased from 3.12% to 3.13%. Points fell from 0.24 to 0.21 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.28% to 3.31%. Points decreased from 0.30 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, declined by 0.9% in the week ending 30th April. In the week prior, the index had fallen by 2.5%.

The Refinance Index rose by 0.1% and was 17% lower than the same week a year earlier. The Index had fallen by 1.0% in the week prior.

In the week ending 30th April, the refinance share of mortgage activity increased from 60.6% to 61.0%. The share had risen from 60.0% to 60.6% in the previous week.

According to the MBA,

  • Mortgage rates were slightly higher last week, leading to a fall in purchase applications for a second straight week.
  • Refinance applications were essentially unchanged in the final week of April.
  • Average loan sizes were on the rise, driven by a competitive purchase market, attributable to low housing inventories and high demand.

For the week ahead

It’s a quieter first half of the week on the U.S economic calendar. JOLTs job openings and inflation figures are in focus.

Following last week’s disappointing nonfarm payroll figures, however, the markets may be desensitized to any pickup in inflationary pressures.

That should leave mortgage rates at sub-3% levels for a 4th consecutive week.