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U.S Mortgage Rates Rise above 3% for the First Time since late June

Mortgage rates jumped above the 3% level for just the 2nd time since 21st April.

In the week ending 30th September, 30-year fixed rates surged by 13 basis points to 3.01%.

30-year mortgage rates have risen just once beyond the 3% mark Since 21st April, when rates hit 3.02% on 23rd June.

Compared to this time last year, 30-year fixed rates were up by 13 basis points.

30-year fixed rates were still down by 193 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a relatively quiet start to the week on the U.S economic data front. Key stats included durable and core durable goods orders and consumer confidence figures.

The stats were skewed to the negative, with core durable goods orders falling short of expectations and consumer confidence waning.

In August, core durable goods orders increased by just 0.2% versus a forecasted 0.5% rise. Core durable goods orders had risen by 0.8% in July.

In September, the CB Consumer Confidence Index fell from 115.2 to 109.3. Economists had forecast a more modest decline to 114.5.

From the housing sector, the upswing in houses prices continued to gather pace. The S&P/CS HSI Composite – 20 n.s.a was up 19.9% year-on-year in July. In June, the index had been up 19.1%.

In spite of rising prices, pending home sales jumped by 8.1% in August, reversing a 2.0% decline from July.

Freddie Mac Rates

The weekly average rates for new mortgages as of 30th September were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 13 basis points to 3.01% in the week. This time last year, rates had stood at 2.88%. The average fee remained unchanged at 0.7 points.
  • 15-year fixed also increased by 13 basis points 2.28% in the week. Rates were down by 8 basis points from 2.36% a year ago. The average fee remained unchanged at 0.6 points.
  • 5-year fixed rates rose by a more modest by 5 basis point to 2.48%. Rates were down by 42 points from 2.90% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • Mortgage rates were up across all loan types as the 10-year U.S Treasury yield reaches its highest point since June.
  • The jump in the 10-year yield was attributed to FED communication on tapering, the broadening of inflation, and emerging energy supply shortages that compound other labor and materials shortages.
  • Freddie Mac expects rates to continue to rise modestly, which will likely have an impact on home prices, causing them to moderate slightly after increasing over the last year.

Mortgage Bankers’ Association Rates

For the week ending 24th September, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances increased from 3.03% to 3.10%. Points increased from 0.30 to 0.34 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA rose from 3.07% to 3.09%. Points remained unchanged at 0.25 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.11% to 3.14%. Points increased from 0.25 to 0.33 (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 1.1% in the week ending 24th September. In the previous week, the index had increased by 4.9%.

The Refinance Index declined by 1.0% and was 0.4% higher than the same week one year ago. The index had increased by 7% in the week prior.

In the week ending 24th September, the refinance share of mortgage activity increased from 66.2% to 66.4% of total applications. The share had risen from 64.9% to 66.2% in the previous week.

According to the MBA,

  • Increased optimism about the strength of the economy pushed Treasury yields higher following last week’s FOMC meeting.
  • Mortgage rates rose across all loan times.
  • The increase in rates led to a decrease in both purchase and refinance applications.
  • With home-price appreciation continuing to run hot, increasing more than 19% annually in July, applications for larger loan amounts continue to outpace lower-balance loans.
  • The average application loan size reached $410,000, its highest level since May 2021.

For the week ahead

It’s a relatively busy first half of the week on the U.S economic calendar.

Factory orders, ISM Non-Manufacturing PMI, and ADP Nonfarm Employment change figures will influence yields early in the week.

Following inflation and personal spending figures, upbeat numbers will give more ammunition to the FOMC hawks to force a move. Such a scenario would push yields northwards and mortgage rates higher.