Mortgage rates slipped back after having been on the rise for just the 2nd time in 7-weeks in the previous week.
In the week ending 19th August, 30-year fixed rates fell by 1 basis point to 2.86%. Mortgage rates had jumped by 10 basis points in the week prior.
30-year mortgage rates have risen just once beyond the 3% mark Since 21st April.
Compared to this time last year, 30-year fixed rates were down by 13 basis points.
30-year fixed rates were still down by 208 basis points since November 2018’s last peak of 4.94%.
Economic Data from the Week
It was a relatively busy first half of the week on the economic data front. Key stats from the U.S included manufacturing numbers for NY State, industrial production, and retail sales figures.
The stats were skewed to the negative, with retail sales falling by 1.0% in July versus a forecasted 0.3% decline. In June, retail sales had risen by 0.7%.
In August, the NY Empire State Manufacturing Index slid from 43.0 to 18.3% versus a forecasted fall to 29.0.
On the monetary policy front, FOMC meeting minutes revealed increased debate over a tapering to the asset purchasing program. Following impressive NFP payrolls, FOMC member chatter in the week weighed on riskier assets, with members talking of a need make a move.
From elsewhere, economic data from China added to concerns over the economic recovery at the start of the week.
Fixed asset investments rose by 6.4% in July, year-on-year, compared with 8.3% in June. Retail sales increased by 8.5% compared with 12.6% in June.
Freddie Mac Rates
The weekly average rates for new mortgages as of 19th August were quoted by Freddie Mac to be:
- 30-year fixed rates fell by 1 basis points to 2.86% in the week. This time last year, rates had stood at 2.99%. The average fee remained unchanged at 0.7 points.
- 15-year fixed increased by 1 basis point 2.16% in the week. Rates were down by 38 basis points from 2.54% a year ago. The average fee fell from 0.7 points to 0.6 points.
- 5-year fixed rates declined by 1 basis point to 2.43%. Rates were down by 48 points from 2.91% a year ago. The average fee held steady at 0.3 points.
According to Freddie Mac,
- Mortgage rates stayed relatively flat in the week. Housing is in a similar phase of the economic cycle as many other consumer goods.
- While there is strong latent demand, low supply has caused prices to rise as shortages restrict the mount of sales activity that would otherwise occur.
Mortgage Bankers’ Association Rates
For the week ending 13th August, the rates were:
- Average interest rates for 30-year fixed with conforming loan balances increased from 2.99% to 3.06. 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 3.06% to 3.15%. Points rose from 0.27 to 0.31 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances increased from 3.15% to 3.19%. Points decreased from 0.29 to 0.26 (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, decreased 3.9% in the week ending 13th August. In the week prior, the Index had increased by 2.8%.
The Refinance Index decreased by 5% and was 8% lower than one week earlier. The Index had increased by 3% in the previous week.
In the week ending 13th August, the refinance share of mortgage activity decreased from 68.0% to 67.3%. The share had increased from 67.6% to 68.0% in the week prior.
According to the MBA,
- Mortgage rates were at their highest levels in around a month, with the 30-year fixed rate rising above 3.0%.
- Rates followed an overall increase in Treasury yields last week, which started high from the strong July jobs report before slowing in response to weaker consumer sentiment and concerns over COVID-19.
- Purchase applications saw mixed results and, despite a second-straight weekly decrease, average loan sizes remain close to record highs.
- This is a continuing sign that sales prices are still elevated, driven by stiff competition leading to accelerating home-price growth.
For the week ahead
Prelim August private sector PMIs on Monday and core durable goods orders on Tuesday will be in focus.
Expect the services PMI and core durable goods orders to be key from the economic calendar.
On the monetary policy front, FOMC member chatter ahead of the FED’s Jackson Hole Symposium will also have a material impact on yields.