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US Mortgage Rates Bounce Back on Strong US Nonfarm Payrolls

In the week ending August 11, mortgage rates jumped in a marked shift in sentiment towards the US economy, supported by impressive nonfarm payroll numbers for July.

30-year fixed rates jumped by 23 basis points, partially reversing the 31-basis point slump from the previous week. Mortgage rates had fallen to below 5% for the first time since April 6.

Year-on-year, 30-year fixed rates were up by 225 basis points while down 59 basis points since the June 22, 2022, peak of 5.81%.

Economic Data from the Week

Nonfarm payroll figures for July set the tone and drove mortgage rates back through 5%. Softer US inflation figures failed to soften the blow for prospective buyers, with the US annual rate of inflation sitting well above the Fed target.

The positive labor market numbers supported another sizeable Fed rate hike in September, with other economic indicators pointing to improving economic conditions.

Freddie Mac Rates

The weekly average rates for new mortgages, as of August 11, 2022, were quoted by Freddie Mac to be:

  • 30-year fixed rates jumped by 23 basis points to 5.22%. This time last year, rates stood at 2.85%. The average fee fell from 0.8 to 0.7 points.
  • 15-year fixed rates surged by 33 basis points to 4.59%. Rates were up by 244 basis points from 2.15% a year ago. The average fee increased from 0.6 points to 0.7 points.
  • 5-year fixed rates rose by 18 basis points to 4.43%. Rates were up by 199 basis points from 2.44% a year ago. The average fee fell from 0.3 points to 0.0 points.

According to Freddie Mac,

  • Mortgage jumped back through the 5.00% mark, demonstrating persistent volatility.
  • Recent data suggests that the housing market is stabilizing following the surge of activity during the COVID-19 pandemic.
  • Falls in purchase demand continue to slow while supply constraints linger.
  • House prices will likely continue to rise, albeit at a slower pace.

Mortgage Bankers’ Association Rates

For the week ending August 5, 2022, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances increased from 5.43% to 5.47%. Points rose from 0.65 to 0.80 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA fell from 5.39% to 5.35%. Points decreased from 1.03 to 1.02 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 5.06% to 5.09%. Points rose from 0.36 to 0.59 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, rose by 0.2%. The Index increased by 1.2% in the week prior.

The Refinance Index rose by 4% and was 82% lower than the same week one year ago. In the previous week, the Index climbed by 2%.

The refinance share of mortgage activity increased from 30.8% to 32.0%. In the week prior, the share increased from 30.7% to 30.8%.

According to the MBA,

  • Mortgage rates remained volatile.
  • While mortgage applications were flat, refinance applications increased as the purchasing market continues to face a slowdown.
  • Activity has declined in five of the last six weeks, with buyers on the sidelines due to affordability conditions and concerns over the economy.

For the week ahead

It is a big week ahead on the US economic calendar. US retail sales will be the key stat of the week. However, on Wednesday, the FOMC meeting minutes will also influence.

The impressive nonfarm payroll numbers and the softer inflation figures have created uncertainty over the September policy decision. The Fed may take the opportunity to deliver another 75-basis point hike that would force mortgage rates northwards while impacting affordability.

Other stats in the week include economic indicators from China that will also influence risk sentiment and US Treasuries indirectly.