Mortgage rates were relatively flat in the week ending 8th October. Following a 2 basis points fall in the week prior, the 30-year fixed rate fell by 1 basis point to 2.87%.
Compared to this time last year, 30-year fixed rates were down by 70 basis points.
30-year fixed rates were also down by 207 basis points since November 2018’s most recent peak of 4.94%.
Economic Data and Events from the Week
Economic data was on the lighter side in the 1st half of the week.
Key stats included September’s ISM Non-Manufacturing PMI and August’s JOLTs job openings were in focus.
While service sector activity picked up in September, labor market indicators raised red flags once more.
In the week prior, the weekly jobless claims and nonfarm payroll figures had disappointed. A fall in job openings was also negative ahead of the weekly jobless claims figures for the week ending 2nd October.
Away from the economic calendar, however, U.S politics continued to steal the show.
Trump’s release from the hospital after being diagnosed with COVID-19 was market risk positive. A decision to postpone any further negotiations on the COVID-19 relief bill was market risk negative, however.
On the U.S Presidential Election front, the Vice Presidential debate had limited impact on the markets. Biden’s lead over Trump began to support riskier assets, however. A Democratic clean sweep is expected to deliver further stimulus to support the economy. The markets appear to be willing to accept a repeal of Trump’s tax bills…
Freddie Mac Rates
The weekly average rates for new mortgages as of 8th October were quoted by Freddie Mac to be:
- 30-year fixed rates decreased by 1 basis point to 2.87% in the week. Rates were down from 3.57% from a year ago. The average fee remained unchanged at 0.8 points.
- 15-year fixed rates rose by 1 basis point to 2.37% in the week. Rates were down from 3.05% compared with a year ago. The average fee remained unchanged at 0.7 points.
- 5-year fixed rates slipped by 1 basis point to 2.89% in the week. Rates were down by 46 points from last year’s 3.35%. The average fee also remained unchanged at 0.2 points.
According to Freddie Mac,
- The year-long slide in mortgage rates seems to be ending as rates have flattened over the last month.
- As mortgage rates have flattened, the economic rebound has also slowed.
- But with near record-low rates, buyer demand remains robust, with strong first-time buyers coming into the market.
- The demand is particularly strong in more affordable regions of the country, such as the Midwest. Here, home prices are accelerating at the highest rate seen over the last two decades.
Mortgage Bankers’ Association Rates
For the week ending 2nd October, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.15% to 3.12%. Points decreased from 0.43 to 0.32 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances decreased from 3.05% to 3.01%. Points fell from 0.52 to 0.37 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances decreased from 3.33% to 3.31%. Points decreased from 0.39 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, increased by 4.6% in the week ending 2nd October. In the week prior, the Index had declined by 4.8%.
The Refinance Index jumped by 8% from the week prior and was 50% higher than the same week a year ago. In the previous week, the index had fallen by 7%.
The refinance share of mortgage activity increased from 63.3% to 65.4%. In the week prior, the share had fallen from 64.3% to 63.3%.
According to the MBA,
- Mortgage rates declined across the board last week – with most falling to record lows.
- Borrowers responded, leading to the increase in the refinance index to its highest level since mid-August.
- Continuing the trend seen in recent months, the purchase market is growing at a strong clip.
- Last week, purchase activity was up by 21% from a year ago.
For the week ahead
It’s a relatively busy 1st half of the week on the U.S economic calendar.
Key stats include September inflation figures due out on Tuesday and Wednesday.
While we can expect the stats to influence yields, the focus will remain on Capitol Hill and the Presidential Election race.
The markets are continuing to hope for further stimulus support from Congress and then there’s the 15th October debate.
Last week, Trump announced that he would not take part in a virtual debate. Breaking the rules once more, the chances of Trump narrowing the gap on Biden are falling…
For the markets, while the repeal of Trump’s tax bill would be market negative, there are some positives to also consider.
From elsewhere, Brexit and economic data from China will also influence market risk sentiment in the week.