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U.S Mortgage Rates Rise but Fall Short of 3%

Mortgage rates bounced back, with rates rising for the 2nd time in 7-weeks.

In the week ending 12th August, 30-year fixed rates jumped by 10 basis points to 2.87%. Mortgage rates had fallen by 3 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 9 basis points.

30-year fixed rates were still down by 207 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 U.S economic calendar.

JOLT’s job openings, 2nd quarter unit labor costs and nonfarm productivity, and July inflation figures were in focus.

A marked pickup in job openings was positive for yields at the start of the week.

The rest of the stats were skewed to the negative, however.

Inflationary pressures eased in July, with the core annual rate of inflation softening from 4.5% to 4.3%.

Unit labor costs rose by a modest 1.0% in the 2nd quarter, with nonfarm productivity increasing by 2.3%. In the 1st quarter, unit labor costs had risen by 2.8% and NFP productivity up by 4.3%.

While the stats were skewed to the negative, the previous Friday’s impressive NFP numbers for July drove mortgage rates northwards.

Freddie Mac Rates

The weekly average rates for new mortgages as of 12th August were quoted by Freddie Mac to be:

  • 30-year fixed rates rose by 10 basis points to 2.87% in the week. This time last year, rates had stood at 2.96%. The average fee rose from 0.6 points to 0.7 points.
  • 15-year fixed increased by 5 basis points 2.15% in the week. Rates were down by 31 basis points from 2.46% a year ago. The average fee rose from 0.6 points to 0.7 points.
  • 5-year fixed rates rose by 4 basis point to 2.44%. Rates were down by 46 points from 2.90% a year ago. The average fee fell from 0.4 points to 0.3 points.

According to Freddie Mac,

  • Nonfarm payroll and wage growth numbers from the previous Friday sent mortgage rates northwards in the week.
  • Despite the rise, rates remain very low, particularly given that economic growth is strong and will continue into next year.

Mortgage Bankers’ Association Rates

For the week ending 6th August, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances increased from 2.97% to 2.99%. Points decreased from 0.33 to 0.30 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA decreased from 3.08% to 3.06%. Points fell from 0.29 to 0.27 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.12% to 3.15%. Points decreased from 0.30 to 0.29 (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 2.8% in the week ending 6th August. In the week prior, the index had fallen by 1.7%.

The Refinance Index increased by 3% and was 8% lower than the same week a year ago. The Index had fallen by 2% in the previous week.

In the week ending 6th August, the refinance share of mortgage activity increased from 67.6% to 68.0%. The share had increased from 67.5% to 67.6 in the week prior.

According to the MBA,

  • Mortgage applications rebounded, including an increase in purchase applications, for the first time in almost a month.
  • While on the rise, driven by an end-of-week increase in 10-year Treasury yields, rates remained below 3%. A positive jobs report for July sent yields northwards.
  • Homeowners continue to respond to lower rates, with refinance activity climbing to its highest level since Feb-2021.

For the week ahead

NY Empire State Manufacturing numbers for August and retail sales figures for July will be in focus.

Expect the retail sales figures to be key as the markets look for other factors that could force the FED to make a move.

Mid-week, housing sector data for July will also draw interest but will unlikely impact Treasury yields. Housing starts and building permits are due out.

On the monetary policy front, the FOMC meeting minutes will influence in the week. Expect any hawkish chatter to send mortgage rates higher.