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U.S Mortgage Rates Rise for a 5th Consecutive Week

Mortgage rates were on the rise for a 5th consecutive week in the week ending 18th March. Following a 3-basis points rise from the week prior; 30-year fixed rates rose by a further 4 basis points to 3.09%.

Compared to this time last year, 30-year fixed rates were down by 56 basis points.

30-year fixed rates were also down by 185 basis points since November 2018’s last peak of 4.94%.

Notably, however, it was just the third plus 3% week since July of last year.

Economic Data from the Week

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

On the economic data front, manufacturing numbers from NY State, retail sales, and industrial production figures were in focus.

It was a mixed bag on the data front.

In March, the NY Empire State Manufacturing Index rose from 12.1 to 17.4, beating forecasts.

It was the only positive stat, however, with both retail sales and industrial production disappointing.

In February, core retail sales fell by 1.7%, with retail sales sliding by 3.0%.

Things were not much better on the production side, with industrial production falling by 2.2% in February.

From elsewhere, economic data from China impressed once more at the start of the week.

Retail sales surged by 33.8%, with industrial production jumping by 35.1%.

Ultimately, however, it was the FED that delivered a 5th consecutive weekly rise in mortgage rates.

While the FOMC economic projections pointed to a hold on rates until 2023, growth and inflation projections were particularly hawkish.

Freddie Mac Rates

The weekly average rates for new mortgages as of 18th March were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 4 basis points to 3.09% in the week. This time last year, rates had stood at 3.65%. The average fee increased from 0.6 points to 0.7 points.
  • 15-year fixed rates rose by 2 basis points 2.40% in the week. Rates were down by 66 basis points from 3.06% a year ago. The average fee rose from 0.6 points to 0.7 points.
  • 5-year fixed rates also rose by 2 basis points 2.79%. Rates were down by 32 points from 3.11% a year ago. The average fee held steady at 0.3 points.

According to Freddie Mac,

  • As expected, mortgage rates continued to inch up but are still hovering around 3%, keeping interested buyers in the market.
  • Residential construction has declined for 2 consecutive months, however.
  • Given the very low inventory environment and competition among potential homebuyers, it is a challenging reality, especially for first-time buyers.

Mortgage Bankers’ Association Rates

For the week ending 12th March, the rates were:

  • Average interest rates for 30-year fixed to conforming loan balances increased from 3.26% to 3.28%. Points decreased from 0.43 to 0.41 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA increased from 3.20% to 3.25%. Points rose from 0.37 to 0.38 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances remained unchanged at 3.34%. Points decreased from 0.50 to 0.40 (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 by 2.2% in the week ending 12th March. In the previous week, the index had fallen by 1.3%.

The Refinance Index decreased by 4% from the previous week and was 39% lower than the same week a year ago. The index had fallen by 5% in the week prior.

In the week ending 12th March, the refinance share of mortgage activity decreased from 64.5% to 62.9%. In the previous week, the share had fallen from 67.5% to 64.5%.

According to the MBA,

  • Mortgage activity was mixed last week, with the run-up in rates reducing incentives for potential refinance borrowers.
  • The 30-year fixed rate increased to its highest level since June 2020.
  • After reaching a recent high in the last week of January, the refinance index has fallen 26% to its lowest level since Sept-2020.
  • Rates have jumped 36 basis points since the end of January, contributing to a fall in refinance activity across all loan types.
  • The purchase market helped offset the slump in refinances, with activity up 5% from a year ago.
  • Labor market conditions and demographic factors delivered support amidst ongoing supply and affordability constraints.

For the week ahead

It’s a relatively quiet first half of the week on the U.S economic calendar once more. Key stats include core durable goods and prelim private sector PMI figures for March.

Expect the services PMI and core durable goods orders to be the key driver.

On the monetary policy front, FED Chair Powell is scheduled to speak on Monday and give Testimony on Tuesday and Wednesday. Expect any chatter on the economic outlook and monetary policy to influence.

Powell will need to deviate from last week’s script, however, to make a material impact.

From elsewhere, private sector PMIs from the Eurozone will also provide yields with direction mid-week.