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U.S Mortgage Rates Fall Again, Leaving Rates at sub-3% for a 4th Consecutive Week

It was a 5th weekly decline in 6-weeks for U.S mortgage rates in the week ending 13th May. Following a 2 basis points fall from the week prior, 30-year fixed rates fell by 2 basis points to 2.94%.

Compared to this time last year, 30-year fixed rates were down by 34 basis points.

30-year fixed rates were still down by 200 basis points since November 2018’s last peak of 4.94%.

Notably, mortgage rates remained below prior the 3% mark for a 4th consecutive week.

Economic Data from the Week

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

Key stats included JOLTs job openings for March and April inflation figures for the U.S.

The stats were skewed to the positive. JOLTs job openings increased from 7.526m to 8.123m in March.

Inflationary pressures were also on the rise, leading to risk aversion mid-week over the possibility of a shift in FED monetary policy.

In April, the annual rate of core inflation accelerated from 1.6% to 3.0%.

The inflation figures followed Friday’s disappointing nonfarm payroll figures for April.

Freddie Mac Rates

The weekly average rates for new mortgages as of 13th May were quoted by Freddie Mac to be:

  • 30-year fixed rates fell by 2 basis point to 2.94% in the week. This time last year, rates had stood at 3.28%. The average fee rose from 0.6 to 0.7 points.
  • 15-year fixed decreased by 4 basis points to 2.26% in the week. Rates were down by 46 basis points from 2.72% a year ago. The average fee remained unchanged at 0.6 points.
  • 5-year fixed rates slid by 11 basis points to 2.59%. Rates were down by 59 points from 3.18% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • Since the most recent peak, mortgage rates have declined nearly a quarter of a percent and have remained under 3% for the past month.
  • Low rates offer homeowners an opportunity to lower their monthly mortgage payment by refinancing.
  • Additionally, the low mortgage rate environment has been a boon for the housing market.
  • This may not last, however, as consumer inflation has accelerated at the fastest pace in more than 12-years, which could lead to higher mortgage rates in the summer.

Mortgage Bankers’ Association Rates

For the week ending 7th May, the rates were:

  • Average interest rates for 30-year fixed to conforming loan balances decreased from 3.18% to 3.11%. Points decreased from 0.34 to 0.32 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA fell from 3.13% to 3.07%. Points rose from 0.22 to 0.34 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.31% to 3.27%. Points increased from 0.27 to 0.34 (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 2.1% in the week ending 7th May. In the week prior, the index had fallen by 0.9%.

The Refinance Index rose 3% and was 12% lower than the same week a year ago. The Index had fallen by 0.1% in the week prior.

In the week ending 7th May, the refinance share of mortgage activity increased from 61.0 to 61.3%. The share had risen from 60.6% to 61.0% in the previous week.

According to the MBA,

  • Mortgage rates fell last week to the lowest levels since February, tracking the dip in Treasury yields.
  • The decline in rates helped the refinance index reach its highest level in 8-weeks.
  • Additionally, refinance loan balances increased for the 4th straight week.
  • The first week of May was also a strong week for the purchase market. Applications were up 13% from a year ago.
  • Housing market activity continues to be constrained by insufficient inventory levels.

For the week ahead

It’s a particularly quiet first half of the week on the U.S economic calendar. NY Empire State Manufacturing figures for May will be in focus at the start of the week.

Housing sector figures for April are also due out but will likely have a muted impact on Treasury yields and mortgage rates.

From elsewhere, fixed asset investment and industrial production figures from China will also influence market risk sentiment in the week.

With economic data on the quieter side, central bank chatter and geopolitics will also provide yields with direction.