Upscale modern house for sale

Mortgage Rates Rates Avoid a 4th Consecutive Weekly Fall as COVID-19 Pegs Back Yields

Mortgage rates avoided a fourth consecutive weekly rise in the week ending 29th April. Following a 7-basis points decline from the week prior, 30-year fixed rates rose by 1 basis point to 2.98%.

Compared to this time last year, 30-year fixed rates were down by 25 basis points.

30-year fixed rates were still down by 196 basis points since November 2018’s last peak of 4.94%.

Notably, mortgage rates remained below prior; the 3% mark.

Economic Data from the Week

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

Key stats included durable goods and core durable goods and consumer confidence figures.

The stats were skewed to the positive, supporting the optimistic economic outlook.

Core durable goods increased by 1.6% to reverse a 0.3% decline from February, with durable goods up by 0.5%.

More significantly, the CB Consumer Confidence Index jumped from 109.0 to 121.7 in April, pointing to a continued pickup in consumption.

On the monetary policy front, the FED was also in action on Wednesday. In line with market expectations, the FED left policy unchanged, while reassuring the markets that there would be no shift in its current stance.

Freddie Mac Rates

The weekly average rates for new mortgages as of 29th April were quoted by Freddie Mac to be:

  • 30-year fixed rates rose by 1 basis point to 2.98% in the week. This time last year, rates had stood at 3.23%. The average fee held steady at 0.7 points.
  • 15-year fixed increased by 2 basis points to 2.31% in the week. Rates were down by 46 basis points from 2.77% a year ago. The average fee increased from 0.6 points to 0.7 points.
  • 5-year fixed rates tumbled by 19 basis points to 2.64%. Rates were down by 50 points from 3.14% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • The upward trend in U.S Treasury yields paused a month ago as a result of rising COVID-19 cases globally.
  • Yields have remained within a tight range as the markets digest incoming economic data.
  • The good news is that with rates under 3%, refinancing continues to be attractive for many borrowers who financed before 2020.
  • But for eager buyers, especially first-time homebuyers, inventory continues to be extremely tight.
  • Competition for available homes to purchase remains high.

Mortgage Bankers’ Association Rates

For the week ending 23rd April, the rates were:

  • Average interest rates for 30-year fixed to conforming loan balances decreased from 3.20% to 3.17%. Points decreased from 0.36 to 0.30 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA decreased from 3.15% to 3.12%. Points fell from 0.31 to 0.24 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.34% to 3.28%. Points increased from 0.29 to 0.30 (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, fell by 2.5% in the week ending 23rd April. In the week prior, the index had increased by 8.6%.

The Refinance Index slipped by 1.0% and was 18% lower than the same week a year earlier. The Index had jumped by 10.0% in the week prior.

In the week ending 23rd April, the refinance share of mortgage activity increased from 60.0% to 60.6%. In the previous week, the share had increased from 59.2% to 60.0%.

According to the MBA,

  • Mortgage applications decreased last week even with mortgage rates falling for a 3rd consecutive week.
  • The 30-year fixed rate was down 3 basis points to 3.17%, which is still 32 basis points higher than the low reported in Dec-2020.
  • Even with a few weeks of lower rates, borrowers have likely already refinanced. This is why activity has decreased in seven of the last eight weeks.
  • The purchase market’s recent slide comes despite a strengthening economy and labor market.
  • Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.

For the week ahead

It’s a busier first half of the week on the U.S economic calendar. The market’s preferred ISM private sector survey PMIs are due out along with ADP nonfarm employment change figures.

Following impressive stats from the U.S last week, another set of positive numbers could nudge yields northwards.

Much will depend on the COVID-19 vaccination front, however, and whether governments can curb the current upward global trend in new COVID-19 cases.

On the monetary policy front, FED Chair Powell is scheduled to speak early in the week, which will also garner plenty of interest.