U.S Mortgages – Rates and Applications Slide Again

Mortgage rates continued to fall in the week ending 3rd January 2019, with 30-year fixed rates falling to 4.51%, hitting levels not seen since 22nd August 2018.

The decline marked an 8th consecutive week of flat or weekly declines

With a shortened week due to the New Year holidays, economic data out of the U.S was on the lighter side, key stats limited to December manufacturing PMI numbers, the weekly initial jobless claims figures and December’s ADP nonfarm employment change numbers.

While the ADP employment change number impressed, manufacturing PMI numbers weighed on market risk sentiment through the week, the market’s preferred ISM Manufacturing PMI sliding from 59.3 to 54.1 in December, raising more alarm bells over the global economic outlook.

Adding downward pressure on Treasury yields was a particularly volatile holiday period in the global financial markets, with a flash crash on Thursday in the FX world seeing the Japanese Yen surge to ¥104 levels before easing back to ¥107 levels.

Weak economic data out of China also drove demand for U.S Treasuries, contributing to the fall in yields, China’s manufacturing PMI contracting in December as the effects of the U.S – China trade war became more apparent at the end of the 4th quarter.

In the U.S equity markets, the Dow was down 1.63% through to Thursday’s close, with the U.S government shut down providing little support.

With 2018 all wrapped up and what eventually became the worse year for the equity markets since 2008, the slide in mortgage rates and slowdown in house price growth, in some areas reversal, may not be enough to save a housing market in dire need of a boost following last year’s mortgage rate surge through to mid-November.

We can expect U.S Treasury yields to become all the more sensitive to economic data in the coming weeks, with housing sector data to also influence, any material slowdown in the housing sector likely to weigh heavily on the U.S economy.

Freddie Mac weekly average rates for new mortgages as of 3rd January were quoted to be:

  • 30-year fixed rate loan fell from 4.55% to 4.51% in the week, while up from 3.95% a year ago. The average fee held steady at 0.5 points.
  • 15-year fixed rates fell from 4.01% to 3.99% in the week, while up from 3.38% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates decreased from 4.00% to 3.98% in the week and up 0.53% from last year’s 3.45%. The average fee eased from 0.3 points to 0.2 points.

Mortgage Bankers’ Association Rates for the week ending 28th December were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.91% to 4.86%, with points decreasing from 0.57 to 0.54 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.86 to 4.84, with points decreasing from 0.47 to 0.42 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.59% to 4.72%, with points rising from 0.28 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, slid by 9.8% over 2-weeks ending 27th December, following on from a 5.8% week-on-week slide in the week ending 14th December.

The Refinance Index fell by 12%, in the week ending 27th December, following on from a 2% week-on-week fall in the week ending 14th December.

The share of refinance mortgages decreased from 43.6% to 42.7%, week-on-week in the week ending 28th December, partially reversing the week of 14th’s increase from 41.5% to 43.5%.

According to the MBA, mortgage applications fell over the past 2-weeks, in spite of 30-year fixed rates continuing to fall, as investors continued to favour U.S Treasuries amid concerns over the U.S and global economic outlook and the extended U.S government shut-down.

For the week ahead, much will depend on the data through the week, following Friday’s labour market figures out of the U.S and FED Chair Powell’s relatively dovish stance on monetary policy. The Dow Jones rallied by more than 700 points to reverse the losses through Thursday, with 10-year Treasury yields seeing their largest single day gain since November 2016.

Positive economic data through the week coupled with a freshly dovish FED Chair could ultimately see mortgage rates take a step northwards for the first time since the week ending 31st October 2018, the last time that 30-year fixed rates rose.

Key stats through the week include December service sector PMI and November factory orders and November trade data, though risk sentiment and the direction of Treasury yields may ultimately be in the hands of trade talks between the U.S and China.

U.S Mortgages – Down Again as Treasury Yields Pullback Further

Mortgage rates continued to fall in the week ending 27th December, with 30-year fixed rates falling by 0.07 percentage points to 4.55%, according to figures released by Freddie Mac.

The downward trend in mortgage rates formed back in mid-November has seen mortgage rates fall to sit just above 5th September’s 4.54%, with the latest decline marking a 7th consecutive flat or weekly fall.

Through the week, it was a particularly choppy holiday season, with the DJIA seeing its worst Christmas Eve on record, followed by the largest single day point gain in history, the volatility certainly spooking investors, while the Dow managed to close out the week in positive territory in spite of the rollercoaster ride.

On the economic data front, it was a relatively quiet week, with key stats out of the U.S limited to the weekly jobless claims figures, December consumer confidence numbers and at the end of the week, December’s Chicago PMI and November pending home sales.

While consumer confidence slipped at the end of the year, a better than expected Chicago PMI reflected strong growth continuing through the 4th quarter, in stark contrast to the Philly and NY State numbers.

For the housing sector, house prices rose by 5% in October, year-on-year, easing back from an annualised 5.2% rise in September, with further pressure coming as pending home sales slipped by 0.7% in November, following a 2.6% slide in October.

While mortgage rates have been on the slide, mortgage applications have failed to bounce back and will need to do so going into the New Year for the housing sector to avoid a marked slowdown.

Freddie Mac weekly average rates for new mortgages as of 27th December were quoted to be:

  • 30-year fixed rate loan fell from 4.62% to 4.55% in the week, while up from 3.99% a year ago. The average fee rose from 0.4 to 0.5 points.
  • 15-year fixed rates fell from 4.07% to 4.01% in the week, while up from 3.44% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates increased from 3.98% to 4.00% in the week and up 0.53% from last year’s 3.47%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association rates and application numbers for the week ending 21st and 28th December will be released on 3rd January along with numbers for 28th December. The below numbers are from the week ending 14th December.

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.97% to 4.95%, the lowest level since Sept-18, with points decreasing from 0.55 to 0.51 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.96 to 4.94 the lowest level since Sept-18, with points decreasing from 0.48 to 0.43 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.80% to 4.74%, the lowest level since Sept-18, with points falling from 0.33 to 0.26 (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, slid by 5.8% in the week ending 14th December, reversing the previous week’s 1.6% rise, week-on-week.

The Refinance Index fell by 2%, in the week ending 14th December, reversing the previous week’s 2% rise, with the share of refinance mortgages increasing from 41.5% to 43.5%, the highest share of applications since February 2018.

While the numbers are unavailable until the New Year, 10-year Treasury yields remained on the back foot through the holiday period and the week leading into the holiday period, which will likely continue to support the downward bias for mortgage rates.

The only question will be whether applications will see a bounce back to provide much needed support to the housing sector, though the holiday season isn’t the best time for prospective home buyers, particularly during the unprecedented volatility witnessed across the U.S equity markets.

For the week ahead, the New Year kicks off with a bang, with economic data scheduled for release including December private sector PMI numbers, November new home sales figures and December’s ADP nonfarm employment change figures that will give investors plenty to think about ahead of Friday’s labour market numbers.

Outside of the U.S, demand for U.S Treasuries could spike should manufacturing PMI numbers out of China deliver disappointment through the week, with the wild ride in the global equity markets also a factor and influence on both rates and applications.

U.S Mortgages – Applications Slide in Spite of Retreating Rates

Mortgage rates saw the downward trend continue in the week ending 20th December, with 30-year fixed falling by 0.01 percentage points to a 3-month low 4.62%.

The fall in 30-year fixed to 4.63%, the lowest level since 12th September’s 4.60%, comes off the back of 6 consecutive weeks of either flat or falling mortgage rates, though the continued fall in rates may not be enough for the housing sector, with the sell-off in the U.S equity markets and ever increasing concerns over the economic outlook pinning back mortgage applications.

Through the week, the Dow slid an impressive 6.87% and the NASDAQ and even more impressive 8.36%, with pressure coming from the prospects of a government shutdown, a reflection of Trump’s wall aspirations and unwillingness to meet common ground with the Democrats and just about anyone else for that matter and concerns over the economic outlook, the effects of the ongoing trade war between the U.S and China beginning to show in economic indicators out of the U.S.

Through the week, the FED’s rate hike on Wednesday was priced in, but FED Chair Powell’s hawkish outlook was not, causing more chaos in the equity markets, driving demand for U.S Treasuries to pin back yields, with the projected rate path for next year easing back to 2 rate hikes from a previously projected 3.

On the housing front, there was some positive news, with building permits, housing starts and existing home sales all coming in ahead of expectations in November, with building permits and housing starts reversing October losses with interest.

Looking at manufacturing PMI numbers however, the bounce in building permits and housing starts may have come a little late, with a marked slowdown in manufacturing activity an ominous sign for the U.S economy.

Freddie Mac weekly average rates for new mortgages as of 20th December were quoted to be:

  • 30-year fixed rate loan fell from 4.63% to 4.62% in the week, while up from 3.94% a year ago. The average fee fell from 0.5 to 0.4 points.
  • 15-year fixed rates remained unchanged at 4.07% in the week, while up from 3.38% from a year ago. The average fee eased back from 0.5 points to 0.4 points.
  • 5-year fixed rates decreased from 4.04% to 3.98% in the week, while up from last year’s 3.39%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 14th December were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.97% to 4.95%, the lowest level since Sept-18, with points decreasing from 0.55 to 0.51 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 4.96 to 4.94 the lowest level since Sept-18, with points decreasing from 0.48 to 0.43 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.80% to 4.74%, the lowest level since Sept-18, with points falling from 0.33 to 0.26 (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, slid by 5.8% in the week ending 14th December, reversing the previous week’s 1.6% rise, week-on-week.

The Refinance Index fell by 2%, in the week ending 14th December, reversing the previous week’s 2% rise, with the share of refinance mortgages increasing from 41.5% to 43.5%, the highest share of applications since February 2018.

The slide in mortgage applications came in spite of the downward trend in mortgage rates in recent weeks, with rising concerns over the economic outlook and the sell-off in the U.S equity markets likely to be giving prospective buyers a reason to hold off for now, with hopes of lower rates also likely to be a contributory factor.

For the week ahead, it’s particularly quiet Christmas week, on the data front at least, with October house price figures out of the U.S on Wednesday being the first set of stats for the markets to consider.

November new home sales and December consumer confidence figures will have some influence on yields on Thursday, though it may well continue to boil down to chatter from Capitol Hill, an extended government shut down being just more angst for a market in recoil mode, which could provide further relief on mortgage rates.

U.S Mortgages – Rates Down Again, With More to Come IF the FED Turns

Mortgage rates fell once more in the week ending 13th December, with 30-year fixed falling by 0.12 percentage points to a 3-month low 4.63%.

The fall in 30-year fixed to 4.63%, the lowest level since 12th September’s 4.60%, comes off the back of 5 consecutive weeks of either flat or falling mortgage rates and it couldn’t come at a better time for the housing sector. While wage growth may be a laggard to house price growth, tight labour market conditions, a softening in the housing sector and falling rates will give some much needed support through the low period.

A slide in U.S Treasuries drove mortgage rates south, driven by risk aversion, with economic data adding to the market angst over the economic outlook, yields falling in spite of an anticipated rate hike by the FED next week. Investors are expecting the FED to scale back its number of hikes for next year, economic indicators out of Asia, Europe and the U.S all raising red flags as the U.S – China trade war continues.

Freddie Mac weekly average rates for new mortgages as of 13th December were quoted to be:

  • 30-year fixed rate loan remained fell from 4.75% to 4.63% in the week, while up from 3.93% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates fell from 4.21% to 4.07% in the week, while up from 3.36% from a year ago. The average fee rose from 0.4 points to 0.5 points.
  • 5-year fixed rates decreased from 4.07% to 4.04% in the week, while up from last year’s 3.36%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 7th December were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 5.05% to 4.97%, the lowest level since Sept-18, with points decreasing from 0.62 to 0.55 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 5.08 to 4.96 the lowest level since Sept-18, with points rising from 0.44 to 0.48 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.89% to 4.80%, the lowest level since Sept-18, with points rising from 0.30 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, increased by 1.6% in the week ending 7th December, following on from the previous week’s 2% rise, week-on-week.

The Refinance Index rose by 2%, in the week ending 7th December partially following on from the previous week’s 6% rise, with the share of refinance mortgages increasing from 40.4% to 41.5%, the highest share of applications since March 2018.

The MBA noted that rates fell across the board alongside U.S Treasury yields, with trade fears continuing to plague the global financial markets, exasperated by the latest widening in the U.S trade deficit.

Alongside falling rates, applications were on the rise, with purchase activity also on the up by more than 3% year-on-year.

The Mortgage Bankers’ Association released its quarterly mortgage debt figures for the 3rd quarter:

  • Total commercial / multifamily mortgage debt outstanding increased by $45.4bn (+1.4%) in the 3rd quarter to an all-time high.
  • Multifamily mortgage debt increased $26.1bn (2%) to $1.3tn, with total commercial / multifamily debt hitting $3.32tn.
  • The continued rise in multifamily debt was attributed to Fannie Mae, Freddie Mac and FHA mortgages.
  • Commercial banks hold the largest share of commercial / multifamily mortgages at $1.3tn (40%).

The Mortgage Bankers’ Association also released November’s new home purchase mortgage applications:

  • Mortgage applications for new homes purchased fell by 11% year-on-year and by 14% month-on-month in November.
  • The MBA estimates that new home sales fell by 7% in November and down by 5% compared with November 2017.
  • Falling new home sales was attributed to affordability, with wage growth lagging behind house-price growth.
  • Adding to the weakness in November was stock market volatility and some degree of uncertainty over the economy.

For the week ahead, focus will be on the FED and of greatest significance, the FOMC’s economic projections and FED Chair Powell press conference late on Wednesday. Prospective home buyers could get more relief on mortgage rates should the FED acknowledge that economic headwinds are beginning to form, with the FOMC doves likely to skew the projections in their favour for 2019.

On the data front, November housing sector data due out through the first half of the week will be of interest, with building permits, housing starts and existing home sales figures due out. It could be quite a turnaround for those who held back from jumping onto the property ladder earlier in the year as mortgage rates began to rise…

U.S Mortgages – A Downward Bias Forming as the FED Grows Wary

Mortgage rates hit reverse in the week ending 6th December, the fall coming off the back of a slide in market risk appetite that weighed heavily on the U.S and global equity markets. 30-year fixed rates eased back to 4.75% according to Freddie Mac, providing some much-needed respite to prospective homebuyers who have been faced with the combination of both rising mortgage rates and house prices.

Through Thursday, the Dow was down 2.31% and it would have been far worse had there not been a major rebound on the day, the Dow has dropped as much as 784.85 points before recovering to limit the loss to just 79.4 points on the day.

News of Hua Wei CFO Meng’s arrest contributed to the negative sentiment, with market uncertainty over what had actually been agreed between Trump and Xi ending in a rabbit in headlights moment, the arrest raising significant doubts on the Chinese being willing to do anything until her release.

On the economic data front, a pickup in private sector activity in November, according to the ISM surveys failed to ease fears of an economic slowdown, with the talk of yield curve inversions and some hawkish FOMC member chatter offsetting any positive stats that were released through the week.

Freddie Mac weekly average rates for new mortgages as of 6th December were quoted to be:

  • 30-year fixed rate loan remained fell from 4.81% to 4.75% in the week, while up from 3.94% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates fell from 4.25% to 4.21% in the week, while up from 3.36% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates decreased from 4.12% to 4.07% in the week, while up from last year’s 3.35%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 30th November were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 5.11% to 5.05%, with points with points decreasing from 0.63 to 0.62 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 5.12 to 5.08, with points easing from 0.46 to 0.44 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances remained increased from 4.88% to 4.89%, with points easing from 0.31 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 2.0% in the week ending 30th November, following on from the previous week’s 5.5% jump, week-on-week.

The Refinance Index rose by 6%, in the week ending 30th November partially reversing the previous week’s 1% rise, with the share of refinancing mortgages increasing from 37.9% to 40.4%, reversing the recent downward trend in the share of refinancing mortgages.

The MBA noted that a slide in U.S Treasury yields, attributed to concerns over slowing global economic growth and uncertainty over U.S and China trade pinned back mortgage rate to support the continued uptick in applications.

A downward trend in mortgage rates saw purchase and refinance loan applications rise by 10% and by 7% respectively since the week prior to the Thanksgiving holiday. The MBA also noted that the average loan size for purchase applications fell from $313,000 to $298,000, the lowest since Dec-17, possibly a reflection of fewer jumbo borrowers or more first-time buyers entering to the market.

For the week ahead, it’s another busy week on the data front, with key stats including November inflation and retail sales figures, together with December prelim private sector numbers, the combination of which will give the markets an idea of where the 4th quarter GDP number is heading.

While the stats will have some influence, it’s ultimately going to boil down to the impact of geopolitical risk on Treasury yields, Tuesday’s Brexit vote and U.S – China trade war rhetoric likely to be the main areas of focus.

Prospective home buyers may be relishing the reversal in mortgage rates, but it could come at a price should economic indicators begin to deteriorate at a more rapid pace that could begin to weigh on the tight labor market conditions that have been enjoyed by many.

U.S Mortgages – Mortgage Rates Steady to Support a Jump in Applications

There was little action in mortgage rates last week, with rates holding steady following the previous week’s largest fall since January 2015, 30-year fixed mortgage rates unchanged at 4.71% in the week ending 29th November.

According to the weekly report released by Freddie Mac, there was a jump in purchase mortgage applications in the week, reflecting continued strong demand in spite of higher mortgage rates than a year ago, with prospective home buyers fence sitting in search of the right time to buy.

A shift in the FED’s outlook towards monetary policy pinned back Treasury yields, with both FED vice chair Clarida and chair Powell talking of being close to monetary policy neutral.

The FOMC meeting minutes that were released on Thursday were taken as dovish and, while the FED may be unwilling to raise any material concerns over the U.S economy, a number of economic indicators have begun to sound the alarm bells, which could see prospective home buyers take more time to go into a housing market that is certainly past its peak.

Following a string of weak housing sector numbers in recent weeks, stats released over the last week provided some hope, though it wasn’t all bells and whistles.

New home sales tumbled by 8.9% in October, month-on-month, with the upward trend in mortgage rates through summer to early October contributing to the sharp pullback in demand, 30-year fixed having risen from an early June 4.54% to an early November high 4.94% before the previous week’s sharp decline.

The good news was that pending home sales got a boost in October, rising 2.6% in spite of the upward trend in rates, though the numbers will be of little comfort for a market that has seen the pace of house price growth ease back in recent months, the S&P / Case Shiller HPI Composite – 20 rising by 5.1% year-on-year in September, marking quite a slowdown when comparing to 6.8% back in the first quarter of this year, the latest rise the softest since a 5% increase in October 2016.

With the overall index being propped up by pockets primarily on the West Coast, it may not be long before the extent of the slowdown in house prices is truly felt. While prospective home buyers have been sitting on the fence waiting for mortgage rates to stabilize, we could see demand fall further as prospective home buyers sit back in hope of a correction in the property market and those opting to rent will be doing so with the knowledge that the rental market has skewed in favour of tenants of late, with rents on the decline.

Freddie Mac weekly average rates for new mortgages as of 29th November were quoted to be:

  • 30-year fixed rate loan remained unchanged at 4.81% in the week, while up from 3.90% a year ago. The average fee rose from 0.4 points to 0.5 points.
  • 15-year fixed rates rose from 4.24% to 4.25% in the week, while up from 3.30% from a year ago. The average fee fell from 0.5 points to 0.4 points.
  • 5-year fixed rates increased from 4.09% to 4.12% in the week, while up from last year’s 3.32%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 23rd November were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 5.08% to 5.11%, with points with points remaining unchanged at 0.63 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 5.16 to 5.12, with points easing from 0.48 to 0.46 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances remained unchanged at 4.88%, with points rising from 0.29 to 0.31 (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 5.5% in the week ending 23rd November, following on from the previous week’s 0.1% fall, week-on-week.

The Refinance Index rose by 1%, in the week ending 23rd November partially reversing the previous week’s 5% fall, with the share of refinance mortgages falling from 38.5% to 37.9%, marking a second consecutive weekly decline in the share of applications.

For the week ahead, we can expect the markets to respond to news from the G20 Summit that concluded on Saturday, news from the G20 Summit of a planned truce and agreement to hold off on 1st January tariffs expected to provide some relief that could spur a jump in Treasury yields and ultimately mortgage rates.

Economic data is also on the heavier side, key stats including November’s private sector PMI numbers, the November ADP employment change numbers and of greater significance, FED Chair Powell’s testimony to Congress that could get hot under the collar following Trump’s dismay towards the recently appointed FED Chair.

U.S Mortgages – Rates Hit Reverse

After a steady week that came off the back of an 11 basis point jump in 30-year fixed mortgage rates in the week ending 8th November, mortgage rates hit reverse last week with a 13 basis point slide to 4.81% the largest weekly fall since January 2015, according to figures released by Freddie Mac.

The reversal saw mortgage rates pull back to levels last seen in October, some relief coming for prospective home buyers that were either forced out of the housing market or were holding out in hopes of a reversal.

A pullback in U.S Treasuries through the shortened week came as demand for the save havens continued amidst a choppy week in the equity markets, with jitters over the global economic outlook, the ongoing U.S trade war with China and the Italian government’s budget clash with the EU weighing through the week, which ultimately left the Dow down 4.44% for the week, with the S&P500 and NASDAQ also deep in the red, with losses of 3.79% and 4.26% respectively.

Economic data released out of the U.S over the last week was on the lighter side, but included, the weekly jobless claims numbers, October housing figures, durable goods orders and finalized consumer sentiment numbers for November.

While a slide in durable goods orders in October contributed to the negative economic outlook, orders falling by 4.4%, of greater concern would have been the October housing numbers, with building permits falling and housing start and existing home sales increases barely making a dent into September’s slides, concerns over the housing sector contributing to the reversal in the equity markets.

Applications have continued to slide and, while the latest pullback in rates could lead to a pickup in demand for the week ending 23rd November, prospective home buyers may start getting a bit edgy if economic indicators continue to deteriorate further.

Freddie Mac weekly average rates for new mortgages as of 21st November were quoted to be:

  • 30-year fixed rate loan slid from 4.94% to 4.81% in the week, while up from 3.92% a year ago. The average fee fell from 0.5 points to 0.4 points.
  • 15-year fixed rates fell from 4.36% to 4.24% in the week, while up from 3.32% from a year ago. The average fee rose from 0.4 points to 0.5 points.
  • 5-year fixed rates eased from 4.14% to 4.09% in the week, while up from last year’s 3.22%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 16th November were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, remained unchanged at 5.08%, with points rising from 0.55 to 0.63 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 5.17 to 5.16, with points easing from 0.55 to 0.48 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.98% to 4.88%, with points rising from 0.28 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, fell by just 0.1% in the week ending 16th November, following on from the previous week’s 3% slide, week-on-week.

The Refinance Index fell by 5%, in the week ending 16th November to the lowest since December 2000, following the previous week’s 4.3% fall, with the share of refinance mortgages falling from 39.4% to 38.5%, reversing the previous week’s gain.

For the week ahead, it’s a particularly busy week, key stats scheduled for release including September November consumer confidence, the FED’s preferred Core PCE Price Index figures, with finalized 3rd quarter GDP numbers also due out.

For the housing sector, September house price figures and October new home and pending home sales are also scheduled for release that will provide further guidance on the state of the housing sector.

While the numbers will certainly have an influence on yields, it’s ultimately going to boil down to Trump’s one-on-one with Chinese Premier Xi, with Treasury yields likely to see some sizeable moves on chatter ahead of next week’s G20 Summit. The APEC Summit did little to ease market jitters, with Premier Xi and U.S Vice President Pence finding little common ground on both trade and security and  if that’s a sign of things to come, mortgage rates will likely ease back further in the coming weeks.

U.S Mortgages – Rates Steady after early November’s Jump

Following the previous week’s 11 basis point jump in 30-year fixed mortgage rates to a 7-year high, rates held steady in the week ending 15th November, with a number of factors pinning mortgage rates back from another week of gains through the week.

Economic data released through the week included October inflation figures that were released on Wednesday, softer inflation numbers easing some pressure on Treasury yields, while some relatively upbeat private sector PMI numbers and October retail sales figures on Thursday supported yields, with economic indicators out of the U.S yet to show signs of a slowdown.

Commentary from FED Chair Powell was also upbeat about the economy, though there was a warning possible impact should the global economy begin to slow, which came off the back of the previous week’s more hawkish than anticipated FOMC statement, the hawkish outlook on policy offsetting the negative effect on yields stemming from market risk aversion.

The hold at early 2011 highs led to greater angst over the housing market, which has begun to face some pressure from low inventories and a rising mortgage rate environment, with affordability continuing to be an issue in spite of lower cost housing showing little sign of a slowdown in demand, supported by rising wage growth and tight labour market conditions.

The upward price trend in lower price tier housing is adding to the sector woes however, with those looking to get onto the first rung of the property ladder needing to reconsider amidst the rising rate environment that doesn’t look ready to reverse anytime soon.

Freddie Mac weekly average rates for new mortgages as of 15th November were quoted to be:

  • 30-year fixed rate loan remained unchanged at 4.94% in the week, while up from 3.95% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates rose from 4.33% to 4.36% in the week, while up from 3.31% from a year ago. The average fee eased from 0.5 points to 0.4 points.
  • 5-year fixed rates held steady at 4.14% in the week, while up from last year’s 3.21%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 9th November were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 5.15% to 5.08%, with points falling from 0.64 to 0.55 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 5.15 to 5.17, with points rising from 0.51 to 0.55 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.97% to 4.98%, with points rising from 0.27 to 0.28 (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, slid by 3.2% in the week ending 9th November, following on from the previous week’s 4% slide, week-on-week.

The Refinance Index fell by 4.3%, in the week ending 9th November to the lowest since December 2000, following the previous week’s 3% fall, with the share of refinance mortgages rising from 39.1% to 39.4%, reversing the previous week’s fall.

The MBA attributed recent financial market volatility and increasing rates to the continued pullback in mortgage application activity, the shift coming in spite of a positive outlook on the overall economy.

Last week, the MBA also released its October New Home Purchase Mortgage Application figures:

  • The latest MBA Builder Application Survey (BAS) showed that mortgage applications for new home purchases fell by 2.1% year-on-year, while up 11% month-on-month.
  • Average loan sizes for new home purchase applications, at around $332,000, was at its lowest level since July 2017, suggesting that a recent increase in inventories has weighed on price growth in certain areas.

For the week ahead, it’s a shortened week, with Thanksgiving on Thursday, leaving key stats scheduled through the week being limited to October house price figures, durable goods orders and finalized consumer sentiment numbers and, while we can expect plenty of interest in the housing sector numbers, the effects of last week’s softer inflation figures on Treasury yields could be overshadowed by positive updates on trade talks between the U.S and China that would ultimately provide further upward pressure on Treasury yields and mortgage rates.

FOMC member chatter through the week will also need to be considered, along with geo-political risk in Europe, negative news expected to drive demand for U.S Treasuries that would see yields hit reverse to weigh on mortgage rates near-term, with a number of FOMC members also delivering more dovish comments on policy that could lead to a pin back in yields should the chatter continue in the week ahead.

U.S Mortgages – Rates Jump to Add more Pressure on the Real Estate Sector

Following last week’s downward move, mortgage rates rebounded in the week ending 8th November, with 30-year fixed surging by 11 basis point to a 7-year high 4.94%.

Economic data through the week was on the lighter side with a slightly softer non-manufacturing sector October PMI continuing to support a positive outlook towards the U.S economy, while the two main events of the week were the U.S mid-term election results on Wednesday and the FED monetary policy decision on Thursday.

With mortgage rates on an upward trajectory, labour market conditions and wage growth have certainly provided some solace, with a slowdown in house price growth also supporting those looking to get onto the property ladder, though the issue remains that the upward trend in rates over the last 12-months has caused prospective buyers to revise budgets, with a lack of inventories also weighing.

While higher mortgage rates have contributed to the slowdown in house price growth, price deceleration has been primarily concentrated in affluent coastal markets, according to Freddie Mac, with more affordable interior markets having yet to experience a slowdown in price growth, adding to the burden of rising mortgage rates on affordability.

Freddie Mac weekly average rates for new mortgages as of 8th November were quoted to be:

  • 30-year fixed rate loan increased from 4.83% to 4.94% in the week, while up from 3.90% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates rose from 4.23% to 4.33% in the week, while up from 3.24% from a year ago. The average fee remained unchanged at 0.5 points.
  • 5-year fixed rates increased from 4.04% to 4.14% in the week and up from last year’s 3.22%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 2nd November were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 5.08% to 5.15%, with points increasing from 0.62 to 0.64 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 5.11 to 5.15, with points rising from 0.50 to 0.51 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.94% to 4.97%, with points falling from 0.28 to 0.27 (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, slide by 4% to its lowest level since Dec-14 in the week ending 7th November, following on from the previous week’s 2.5% fall, week-on-week.

The Refinance Index fell by 3%, in the week ending 7th November, following the previous week’s 4% slide, with the share of refinance mortgages falling from 39.4% to 39.1%.

The MBA noted that the upward trend in mortgage rates was attributed to better than expected nonfarm payroll figure and a jump in wage growth, with a 30-year fixed at 5.15% sitting at the highest level since Apr-10.

Both purchase and refinance activity slid, with the purchase index hitting its lowest level since 2016, reflecting the effect of inventory shortages and rising mortgage rates on home buying activity.

Last week, the MBA also released its delinquency numbers for the 3rd quarter:

  • Delinquency rates of mortgage loans for one-to-four unit residential properties rose to a seasonally adjusted 4.47% of all loans outstanding at the end of the 3rd
  • Quarter-on-quarter, the delinquency rate was up 11 basis points, while down 41 basis points from one year ago.
  • The percentage of loans on which foreclosure actions were started fell by 1 basis point to 0.23%, its lowest level since the 4th quarter of 1985.
  • Natural disasters affected delinquencies, with a number of hurricanes and tropical storms affecting state numbers.

Key findings from the MBA’s Quarterly National Delinquency Survey Included:

  • All loan types saw mortgage delinquency rates rise, quarter-on-quarter, in the 3rd.
  • Year-on-year, delinquencies were down across all loan types.
  • The serious delinquency rates stood at 2.13%, the percentage of loans that are 90 days or more past due or in the process of foreclosure, down 17 basis points from the last quarter and down by 39 basis points from last year.
  • The percentage of loans in the foreclosure process at the end of the 3rd quarter stood at 0.99%, down 6 basis points from the 2nd quarter and down by 24 basis points from one year ago, the foreclosure inventory rate sitting at its lowest level since 2nd quarter, 2006.

For the week ahead, it’s a relatively busy week on the data front, with key stats including October inflation numbers on Wednesday and retail sales, business inventories and manufacturing sector PMI numbers for November due out on Thursday, while upward pressure on yields following last week’s FOMC statement will also look to nudge mortgage rates ever close to 5%.

Outside the numbers, geo-political risk will play a hand in the direction of U.S Treasury yields, the dust yet to settle following the mid-terms on Wednesday and with Brexit and Italy’s budget also there to influence.

U.S Mortgages – Rates Ease Back on October’s Risk Aversion

Following last week’s upward move, mortgage rates eased in the week ending 1st November, with 30-year fixed falling by 3 basis point to 4.83%.

Risk aversion through the week ending 26th October had driven demand for U.S Treasuries, leading to the fall in yields, with the Italian coalition government’s budget and rising concerns over the effects of the ongoing U.S – China trade war on the Chinese and global economies also weighing, China’s GDP number having come in softer than expected in that week.

Adding to the recent market stress has been concerns over the FED moving more aggressively on rates, with talk of a need to move beyond normalization adding to the financial market angst and demand for U.S Treasuries.

Economic data through the last week provided some relief for the equity markets, with the release of the FED’s preferred Core PCE Price Index figures, which saw the annual rate of inflation holding steady at 2%, while consumer confidence hit an 18-year high in October, according to the CB figures released on Tuesday.

Upbeat nonfarm payroll figures released by ADP and a rebound in unit labour costs in the 3rd quarter provided further support for the FED’s outlook on policy however, while weaker than expected manufacturing sector activity in October provide further evidence that the U.S – China trade war has had some impact on the U.S economy.

The risk on sentiment through the lat week, supported by some upbeat quarterly earnings figures has seen U.S Treasury yields pick up through the week that will likely see mortgage rates resume their upward trend in the coming week’s figures.

On the downside for the housing sector, following a string of weak stats, there was a further slowdown in U.S house prices, with the S&P / CS HPI Composite – 20 n.s.a recording a 5.5% rise in house prices in August, year-on-year, falling short of a forecasted 6% rise and down on July’s 5.9% increase.

The housing sector has garnered plenty of attention of late, with the rising mortgage rate environment and lack of inventories raising concern over affordability that has led to a downward trend in mortgage applications. Freddie Mac noted in the week that a chronic lack of supply, driving house prices higher, has been of greater significance than rising mortgage rates. Freddie Mac also stated that first-time buyer and entry level home sales have remained firm across most of the country, with a fall in house sales concentrated in the more expensive segments of the sector.

Labour market conditions and rising wages have certainly eased pressures from rising mortgage rates, with an easing in house price gains also supporting the demand observed by Freddie Mac at the lower end of the property ladder.

Freddie Mac weekly average rates for new mortgages as of 1st November were quoted to be:

  • 30-year fixed rate loan decreased from 4.86% to 4.83% in the week, while up from 3.94% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates fell from 4.29% to 4.23% in the week, while up from 3.27% from a year ago. The average fee rose from 0.4 points to 0.5 points.
  • 5-year fixed rates slipped from 4.14% to 4.04% in the week and up from last year’s 3.23%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 26th October were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 5.07% to 5.08%, its highest level since April 2011, with points increasing from 0.61 to 0.62 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 5.11, its highest level since February 2011, with points easing from 0.52 to 0.50 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 5.01% to 4.94%, with points remaining unchanged at 0.28 (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 2.5% in the week ending 26th October partially reversing the previous week’s 4.9% increase, week-on-week.

The Refinance Index fell by 4%, in the week ending 26th October, reversing the previous week’s 10% surge, with the share of refinance mortgages falling from 39.8% to 39.4%.

According to the MBA, while 30-year fixed mortgage rates held steady over the week, total applications were in decline overall, with purchase applications easing back over the week and over the year, this being the first year-on-year decline in purchase activity since August. The pullback in purchase activity was attributed to the rise in mortgage rates through the year and the recent stock market volatility.

For the week ahead, it’s a quiet week on the data front, with key stats including non-manufacturing PMI numbers, September’s JOLTs job openings, consumer sentiment and wholesale inflation figures. While we will expect the numbers to have some influence on the direction of U.S Treasury yields, the markets will likely be gripped by the U.S mid-terms on Tuesday, which could well overshadow corporate earnings through the week, and the FED’s November policy decision.

On top of the mid-terms, progress on trade talks between the U.S and China, Italy’s budget and Brexit will also be of influence market risk appetite, though to a lesser extent barring the unexpected.

U.S Mortgages – Upward Trend Resumes

Following last week’s pause, the upward trend in mortgage rates resumed in the week ending 25th October, with 30-year fixed gaining 1 basis point to 4.86%

A relatively busy week on the data front contributed to the uptick in mortgage rates, with durable goods orders rising by 0.8% in September and the private sector seeing an increase in activity across both manufacturing and service sectors, driven by domestic demand.

On the downside for the housing sector, there was more bad news with new home sales sliding by 5.5% in September, reversing the previous month’s 3% gain, adding further pressure on a sector that is not only struggling with limited inventories, but also a rising mortgage rate environment as the FED looks to extend beyond normalization on the policy front.

The uptick in mortgage rates came in spite of a sell-off across the global equity markets that saw the Dow down 1.81% through to Thursday’s close, with the S&P500 down 2.25%, the losses coming even after a solid bounce on Thursday that saw the pair gains 1.63% and 1.41% respectively, driven by positive earnings results. Thursday’s equity market recovery provided the uptick in Treasury yields to give mortgage rates a minor gain, the slide in new home sales and stock market volatility having pinned back yields earlier in the week.

Freddie Mac weekly average rates for new mortgages as of 25th October were quoted to be:

  • 30-year fixed rate loan increased from 4.85% to 4.86% in the week, while up from 3.84% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates remained unchanged at 4.29% in the week, while up from 3.25% from a year ago. The average fee remained unchanged at 0.4 points.
  • 5-year fixed rates increased from 4.10% to 4.14% in the week and up from last year’s 3.21%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 19th October were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.99% to 5.07%, its highest level since April 2011, with points decreasing from 0.69 to 0.61 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 5.10% to 5.11, its highest level since February 2011, with points easing from 0.55 to 0.52 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.98% to 5.01%, with points decreasing from 0.34 to 0.28 (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 4.9% in the week ending 19th October following on from the previous week’s 7.1% decline, week-on-week.

The Refinance Index jumped by 10%, in the week ending 19th October, reversing the previous week’s 9% fall, with the share of refinance mortgages rising from 38.1% to 39.8%.

The bounce back in mortgage activity was attributed to weaker activity the prior week that was a shortened week, with Columbus Day having been on the Monday, with the largest effect being seen in refinance applications across the 2-weeks, which ultimately resulted in a net 1% rise. In contrast, purchase mortgage applications saw a net 2.2% decline over the 2-weeks, reflecting tight inventories and a deteriorating affordability environment.

The Mortgage Bankers Association also released its multifamily lending figures for 2017 on 25th October.

  • Strong market conditions supported a 6% rise in multifamily lending in 2017, with lenders providing a record high $285bn in new mortgages for apartment buildings with 5 or more units.
  • It wasn’t just larger loan sizes, but also record levels of overall borrowing and lending that drove the annual rise.
  • By Dollar volume, the greatest share went to the Government Sponsored Enterprises (“GSEs”) Fannie Mae and Freddie Mac.

For the week ahead, it’s a particularly busy on the economic data front, with key stats through the week including the FED’s preferred September inflation figures that are released alongside personal spending data, October consumer confidence figures on Tuesday, ADP nonfarm employment change numbers and 3rd quarter employment cost index figures on Wednesday, and the market’s preferred ISM manufacturing PMI numbers on Thursday that are released alongside 3rd quarter labour productivity and labour costs.

With 1st estimate GDP numbers having been released last Friday, upward momentum in yields is expected though much will depend on market risk sentiment through the week, the sell-off in the global equity markets having supported demand for U.S Treasuries through the week in spite of the positive sentiment towards the U.S economy.

U.S Mortgages – Applications Slide as Mortgage Rates Hit Pause

U.S mortgage rates took a pause, following the previous week’s jump in mortgage rates to the highest level since April 2011, with 30-year fixed mortgage rates easing back by just 5 basis points to 4.85% in the week ending 18th October, according to Freddie Mac’s latest weekly report.

Key stats through the week were mixed, better than expected manufacturing data out of NY State and Philly easing concerns of a possible near-term slowdown in the U.S economy going into the 4th quarter, with September industrial production numbers also holding firm, while housing sector data continued to raise red flags, alongside weaker than expected retail sales figures.

While the numbers were ultimately skewed to the negative for yields, the FOMC meeting minutes released on Wednesday provided an uptick in 10-year Treasury yields, with the minutes revealing a more hawkish than anticipated FED that may ultimately move beyond neutral on rates to pin back the U.S economy from overheating.

For prospective homebuyers, the good news was the weaker housing sector numbers, with existing home sales sliding 3.4% in September, following a 0.2% fall in August, the slide to a 3-year low expected to put further pressure on U.S house prices that have seen price growth deceleration and in certain states decline.

A continued rise in mortgage rates and fall in rental rates amidst the current labour market environment could have a material impact on house prices should supply rise further, though looking at the latest housing starts and building permit figures for September, a 5.3% slide in housing starts will continue to raise questions over supply, with September building permits also seeing red off the back of August’s 5.7% slide.

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

  • 30-year fixed rate loan eased from 4.90% to 4.85% in the week, while up from 3.82% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates slipped from 4.29% to 4.26% in the week, while up from 3.19% from a year ago. The average fee fell from 0.5 points to 0.4 points.
  • 5-year fixed rates increased from 4.07% to 4.10% in the week and up from last year’s 3.17%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 12th October were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.98% to 4.99%, its highest level since April 2011, with points increasing from 0.63 to 0.69 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 5.05% to 5.10%, its highest level since February 2011, with points rising from 0.51 to 0.55 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 4.99% to 4.98%, with points decreasing from 0.35 to 0.34 (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, slid by 7.1% in the week ending 12th October following on from the previous week’s 1.7% decline, week-on-week.

The Refinance Index slid by 9%, in the week ending 12th October, following the previous week’s 3% fall, with the share of refinance mortgages sliding from 39.4% to 38.1%.

The Mortgage Bankers Association also released its forecasts for mortgage originations for 2019 on 16th October.

  • The MBA expect to see $1.24tn in purchase mortgage originations in 2019 – a 5.2% increase from 2018.
  • Refinance mortgages are expected to continue on a downward trend, with forecasts pointing to a 12.4% slide to $395bn.
  • Overall in 2019, total mortgage applications are forecasted to decrease from $1.64tn to $1.63tn, with originations forecasted to hit $1.27tn in 2020, with refinance originations of $410, for a total of $168tn.

The upward projections were supported by the unemployment rate at its lowest level in almost 50-years and with a deceleration in the rate of home price growth giving income growth an opportunity to catch up, the shift expected to offset the upward trend in interest and mortgage rates.

For the week ahead, it’s another busy week on the economic calendar, with October’s prelim private sector PMI numbers and September durable goods orders due out ahead of Friday’s 3rd quarter GDP figures, solid numbers expected to provide further support to yields.

From the housing sector, September new home sales and pending home sales are scheduled for release, with new home sales forecasted to take a dive and pending home sales to also see red, to add to the sector’s woes.

Outside the stats, geo-political risk will continue to influence, the Saudi’s admission of Kashoggi’s murder in their Turkish consulate expected to lead to a U.S response that could weigh on risk appetite further, the mid-term elections rapidly approaching and the U.S – China trade war showing no signs of abating. A risk-off week would provide some further respite to prospective home owners, though a shift in the FED’s outlook on policy would ultimately be needed for the outlook for mortgage rates to improve for home buyers.

U.S Mortgages – A Weekly Jump Adds More Pressure on the Housing Sector

U.S mortgage rates took a wild leap in the week ending 11th October, with the 30-year fixed mortgage rate surging by 19 basis points to 4.90%, the highest level since 14th April 2011, according to Freddie Mac’s latest weekly report.

The weekly jump certainly brought mortgage rates back in line with the upward trend in U.S 10-year Treasury yields, last week’s hold on rates an anomaly when considering the 7-year highs in Treasury yields through the week.

This week’s mortgage rate moves certainly compensated for last week’s muted response, with economic data released through to Thursday’s close being on the lighter side and ultimately having little to no impact on Treasury yields and the direction of mortgage rates for that matter.

Key stats through the week were limited to September wholesale and consumer price inflation figures, along with the weekly jobless claims numbers, softer annual inflation rates providing mortgage rates from little shelter from the ongoing move towards 5%.

Outside of the numbers, a glowing review of the U.S economy by FED Chair Powell contributed to the jump in Treasury yields, the view on the U.S economy supporting the more hawkish FOMC rate path projections that see rate hikes continuing through December and next year.

FED Chair Powell’s comments came in spite of market volatility, with rising tensions between the U.S and China and the IMF’s latest growth forecast downgrades for this year and next seemingly having little influence as the U.S economy powers ahead.

If there were concerns previously over affordability, the latest jump in mortgage rates, coupled with falling demand, attributed to higher rates and rising home prices, will certainly turn the screw for prospective home buyers and that not going to be a good thing for the housing sector, which is considered to be a barometer of the U.S economy. Debate of the real estate sector has garnered more airtime, though by historical standards, the current mortgage rate environment is less of an issue, the lack of wage growth and inventories being of greater concern.

Freddie Mac weekly average rates for new mortgages as of 11th October were quoted to be:

  • 30-year fixed rate loan jumped from 4.71% to 4.90% in the week, while up from 3.91% a year ago. The average fee rose from 0.4 points to 0.5 points.
  • 15-year fixed rates increased from 4.15% to 4.29% in the week, while up from 3.21% from a year ago. The average fee increased from 0.4 points to 0.5 points.
  • 5-year fixed rates increased from 4.01% to 4.07% in the week and up from last year’s 3.16%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 5th October were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.95% to 4.98%, its highest level since April 2011, with points decreasing from 0.80 to 0.63 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances eased from 4.96% to 5.05%, its highest level since February 2011, with points rising from 0.49 to 0.51 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 4.93% to 4.99%, its highest level since July 2011, with points increasing from 0.31 to 0.35 (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, slid by 1.7% in the week ending 5th October following on from the previous week’s hold steady, week-on-week.

The Refinance Index slid by 3%, in the week ending 5th October, following the previous week’s 0.1% fall, with the share of refinance mortgages remained unchanged at 39.4%.

The Mortgage Bankers Association also released its September figures for new home purchase mortgage applications on 11th October.

  • Mortgage applications for new homes rose by 8.2% in September 2017, compared with September 2017, whilst down 9% when compared with August 2018.
  • The MBA views September’s year-on-year rise of 8.2% in applications as supportive of continued demand for new homes, in spite of rising mortgage rates.
  • Seasonally adjusted, the MBA estimated a 3.9% fall in the number of new single family home sales compared with August.

For the week ahead, it’s a busy economic calendar, with September retail sales and manufacturing numbers scheduled for release along with the ever increasingly important JOLTs job openings and housing sector data. With so much speculation on whether the housing sector has begun to hit the brakes, September’s building permit, housing start and existing home sales figures will provide some further evidence on whether mortgage rates have begun to bite, September seeing mortgage rates resume an upward trend that reversed the downward trend through August with interest.

U.S Mortgages – Steady In Spite of a Bond Sell-Off

U.S mortgage rates managed to avoid a 6th consecutive weekly rise, with rates easing back by just 1 basis point to 4.71% for the week ending 4th October, according to Freddie Mac’s latest report, leaving mortgage rates just shy of last week’s 7-year high.

In spite of the minor pullback in the week, economic data out of the U.S continue to support the upward trajectory for mortgage rates, with 5% rates unlikely to be far off should momentum in the U.S economy continue, the mid-term elections deliver few shocks and the U.S and China settle their differences.

Economic data released through the week ending 4th October included softer than anticipated core PCE price index figures for August together with September private sector PMI numbers and September’s ADP nonfarm employment change and weekly initial jobless claims numbers that were all skewed to the positive ahead of official government nonfarm payroll and wage growth figures that were released on Friday and will influence next week’s moves.

Outside of the data, FED Chair Powell also contributed to the upward momentum in U.S Treasury yields, with a positive outlook on the economy and hawkish chatter on policy getting a market reaction, while the positive sentiment towards NAFTA’s replacement USMCA was offset by rising tensions between the U.S and China, which has raised question on whether the continued surge in economic activity is as a result of companies looking to avoid fresh tariffs or due to actual demand, business inventory numbers in the coming months likely to tell the story.

Freddie Mac weekly average rates for new mortgages as of 4th October were quoted to be:

  • 30-year fixed rate loan slipped from 4.72% to 4.71% in the week, while up from 3.85% a year ago. The average fee falling to 0.4 points from the previous week’s 0.5 points.
  • 15-year fixed rates fell from 4.16% to 4.15% in the week, while up from 3.15% from a year ago. The average fee fell from 0.5 points to 0.4 points.
  • 5-year fixed rates increased from 3.97% to 4.01% in the week and up from last year’s 3.18%. The average fee held steady at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 28th September were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.94% to 4.95%, its highest level since May 2011, with points decreasing from 0.83 to 0.80 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances eased from 4.97% to 4.96%, just shy of its highest level since April 2011, with points rising from 0.47 to 0.49 (incl. origination fee) for 80% LTV loans..
  • Average 30-year rates for jumbo loan balances increased from 4.92% to 4.93%, its highest level since July 2011, with points increasing from 0.30to 0.31 (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, was unchanged in the week ending 28th September following on from the previous week’s 2.9% increase, week-on-week.

The Refinance Index decreased by 0.1%, in the week ending 28th September, following the previous week’s 3% rise, with the share of refinance mortgages remained unchanged at 39.4%.

The Mortgage Bankers Association also released its mortgage credit availability report for September:

  • The Mortgage Credit Availability Index (“MCAI”) fell by 0.8% to 182.1, reflecting a tightening in lending standards.
  • The Conventional MCAI increased by 1.2%, while the Government MCAI fell by 2.5%.
  • Out of the Conventional MCAI, the Jumbo MCAI increased by 2.7%, while the Confirming MCAI fell by 0.7%.
  • The Jumbo MCAI sub-index rose for a 5th time in 6 months to its highest level on record.
  • The decline in the government MCAI was attributed to a decline in loan programs with lower credit requirements and fewer streamline offerings, the combination taking the government MCAI to its lowest level since July 2015.

For the week ahead, it’s a less hectic economic calendar with the Monday holiday in the U.S, key stats through the week limited to wholesale and consumer inflation figures due out on Wednesday and Thursday. A forecasted uptick in the annual rate of inflation could spur another U.S Treasury sell-off, but with geo-political risks ever present and China returning from a week off, it’s not just the stats that will provide Treasuries and mortgage rates with direction through the week.

U.S Mortgages – 5 in a Row Brings 5% into View

U.S mortgage rates rose for a 5th consecutive week, in the week ending 27th September, with mortgage rates hitting their highest levels since the beginning of April 2011, when rates were sitting at 4.78%, according to figures released by Freddie Mac.

Contributing to the week’s upward momentum was a hawkish FED that pencilled in a continuation of this year’s quarterly hikes through next, while also upwardly revising U.S economic growth projections. The bond markets took a breather from the ongoing trade war with China, in spite of China pulling out of planned talks on trade following the roll out of fresh tariffs on Chinese goods last Monday.

The performing U.S economy along with tight labour market conditions have certainly contributed, with consumer confidence continuing to sit at 18-year highs. Things could get messy however, should the U.S – China trade war begin to impact labour market conditions and mortgage rates continue to head towards 5%.

Economic data released through to Thursday included finalized 2nd quarter GDP numbers and September consumer confidence figures that provided support, with August durable goods order numbers also a positive, while September private sector PMIs rolled out and suggesting slower productivity at the end of the 3rd quarter.

For the real estate market, July house prices rose by 5.9% year-on-year, according to the S&P / CS HPI Composite – 20, easing back from a 6.4% rise in June. The easing in house price growth was largely expected, with mortgage rates on the rise and affordability weighing on demand, though support had continued to come from a lack of inventories.

New home sales jumped by 3.5% in August, reversing July’s 1.6% fall, while pending home sales continued to fall, down 1.8% off the back of a 0.8% in July. The mixed numbers will raise further questions on what lies ahead for the sector, falling prices likely to see home owners look to sell-out, recent stats certainly raising some early red flags. Labour market stability will now be the key for the housing market to avoid a correction going into 2019 and for now, mortgage applications seem to be unaffected by the upward trend in mortgage rates.

Freddie Mac weekly average rates for new mortgages as of 27th September were quoted to be:

  • 30-year fixed rate loan increased from 4.65% to 4.72% in the week, while up from 3.83% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates rose from 4.11% to 4.16% in the week, while up from 3.13% from a year ago. The average fee remained unchanged at 0.5 points.
  • 5-year fixed rates increased from 3.92% to 3.97% in the week and up from last year’s 3.20%. The average fee eased back from 0.4 points to 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 21st September were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.90% to 4.94%, with points increasing from 0.73 to 0.83 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 4.88% to 4.97%, its highest level since April 2011, with points rising from 0.44 to 0.47 (incl. origination fee) for 80% LTV loans..
  • Average 30-year rates for jumbo loan balances increased from 4.77% to 4.92%, with points increasing from 0.28 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, rose by 2.9%, following on from the previous week’s 1.6% increase, week-on-week.

The Refinance Index increased by 3%, in the week ending 21st September, partially reversing the previous week’s 4% rise, with the share of refinance mortgages rising from 39.0% to 39.4%.

Multifamily mortgage debt figures were also released in the week, with outstanding debt rising to $1.3tn according to the MBA, an increase of $20bn or 1.6% in the 2nd quarter, quarter-on-quarter. The level of commercial / multifamily mortgage debt outstanding increased by $52.3bn to $3.27tn, with all 4 major investor groups seeing an increase.

The increase in mortgage debt on commercial and multifamily properties grew faster in the first half of 2018 than at any other time since the first half of 2007.

For the week ahead, it’s nonfarm payroll week, the ADP numbers on Wednesday in focus, with September private sector PMI numbers and the weekly jobless claims figures also there to provide direction ahead of Thursday’s mortgage rate updates and Friday’s official labour market numbers. Any weakness in the ISM private sector numbers and yields could pullback, with geo-political risk on the rise as the Italian government looks to take on The Establishment as trade jitters linger.

The FED has put mortgage rates back on an upward path and, barring any disastrous stats, it may ultimately boil down to political events in the week ahead on whether rates can rise for a 6th consecutive week.

U.S Mortgages – Up 4-Weeks in a Row, a 5th Looking a Stretch

U.S mortgage rates rose for a 4rd consecutive week, in the week ending 20th September, with mortgage rates hitting their highest levels since the beginning of May, 4 weeks of rises reversing 3 previous weeks of decline with interest.

Freddie Mac weekly average rates for new mortgages as of 20th September were quoted to be:

  • 30-year fixed rate loan increased from 4.6% to 4.65% in the week, while up from 3.83% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates rose from 4.06% to 4.11% in the week, while up from 3.13% from a year ago. The average fee remained unchanged at 0.5 points.
  • 5-year fixed rates slipped from 3.93% to 3.92% in the week, while up from last year’s 3.13%. The average rose from 0.3 points to 0.4 points.

Mortgage Bankers’ Association Rates for the week ending 14th September were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.84% to 4.90%, with points increasing from 0.51 to 0.73 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 4.84% to 4.88%, its highest level since April 2011, with points falling from 0.46 to 0.44 (incl. origination fee) for 80% LTV loans..
  • Average 30-year rates for jumbo loan balances increased from 4.72% to 4.77%, with points easing from 0.47 to 0.28 (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, rose by 1.6%, reversing most of the previous week’s 1.8% decline, week-on-week.

The Refinance Index jumped by 4%, in the week ending 14th September, partially reversing the previous week’s 6% slide, with the share of refinance mortgages rising from 37.8% to 39.0%.

The upward move in mortgage and refinance applications comes as the FED looks to push ahead on its path towards monetary policy normalization, economic indicators out of the U.S continuing to point towards a robust economy, with wage growth kicking in and labour market conditions tightening further, the weekly jobless claims number sitting at a 49-year low.

Through the week, key stats released out of the U.S included September’s Philly FED Manufacturing Index figure, which rebounded in spite of the ongoing trade war with China, easing concerns over an immediate impact on the U.S economy, while supporting a possible December rate hike off the back of a priced in hike by the FED on Wednesday.

August housing sector stats were mixed, according to figures released through the week, with existing home sales flat, following a 0.7% fall in July, while housing starts surged by 9.2%, wiping out most of June’s 12.3% slide. On the downside for the sector was a 5.7% fall in building permits in August, which raises more red flags for the real estate sector in general.

In spite of the jump in housing starts and mortgage applications, the sector remains under the cosh at present, reflected in building permit numbers, with the upward trend in mortgage rates continuing to test first time buyer affordability, a hawkish FED and inflationary pressures adding to prospective home buyer considerations, the upward trend in wage growth providing some support, the benefits from the tax reform bill from earlier in the year now a distant memory.

While economic data out of the U.S provided direction, supporting an uptick in U.S Treasury 10-year yields, it boiled down to a shift in sentiment towards the U.S – China trade war, a jump in market risk appetite driving yields northwards.

For the week ahead, economic data scheduled for release is on the heavier side and will have some influence on yields, with September consumer confidence figures due out on Tuesday and finalized 2nd quarter GDP numbers and August durable goods orders due out on Thursday.

While the stats will provide some influence, direction on yields will likely come down to the outcome to the FOMC monetary policy meeting mid-week, with focus likely to be on the economic projections rather than the September decision itself, a rate hike priced in and the markets unlikely to be disappointed, though there is no such thing as a sure thing.

The question will be whether the FED will signal a data dependent green light for a December rate hike, recent economic indicators and upward trend in inflation supporting a December move.

A hawkish FED and expect upward momentum in yields and ultimately mortgage rates, though there is an ever present threat to the upward trend in yields and mortgage rates, that being the Oval Office and the ongoing trade war. NAFTA talks have made little progress and the U.S and China seem intent on hitting each other with tariffs ahead of the mid-term elections.

While few are expecting Trump to lose both houses, any signs of weakness in the U.S economy come November and things could get interesting…

From the housing sector, July house prices and August new home and pending home sales are due out through the week. Talks of the U.S economy peeking out and housing sector woes becoming an early warning system to the U.S economy could place some demand for U.S Treasuries, though how the FED projects growth for the remainder of the year and next will likely be of greater significance.

U.S Mortgages – Up Again to Make it 3-In-A-Row

U.S mortgage rates rose for a 3rd consecutive week, in the week ending 13th September, with mortgage rates hitting their highest levels since the beginning of August, 3 weeks of rises reversing 3 previous weeks of decline.

According to Freddie Mac, mortgage rates are sitting 0.82% higher year-on-year, which is the largest year-on-year increase since May-14.

A number of factors contributed to the jump in mortgage rates, including August nonfarm payroll and wage growth figures and last week’s July JOLTs job openings that reflected employee optimism in the market with a rise in quit rates, suggesting more wage growth to come.

While the economic data was certainly a positive, softer August inflation figures released on Thursday were not enough to reverse the uptick in 10-year Treasury yields, an anticipated further pickup in the pace of wage growth supporting a bounce back in the annual rate of inflation.

Adding further upward pressure on yields was news of a sizeable widening in the U.S deficit, raising concerns over an increased supply, leading to a pullback in demand for U.S Treasuries, with talk of the U.S reaching out to China to resume trade talks, further easing demand.

Freddie Mac weekly average rates for new mortgages as of 13th September were quoted to be:

  • 30-year fixed rate loan increased from 4.54% to 4.60% in the week, while up from 3.78% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates rose from 3.99% to 4.06% in the week, while up from 3.08% from a year ago. The average fee increased from 0.4 points to 0.5 points.
  • 5-year fixed rates remained unchanged at 3.93% in the week, while up from last year’s 3.13%. The average remained unchanged at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 7th September were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.79% to 4.84%, with points decreasing from 0.69 to 0.51 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 4.80% to 4.84%, with points rising from 0.43 to 0.46 (incl. origination fee) for 80% LTV loans..
  • Average 30-year rates for jumbo loan balances increased from 4.67% to 4.72%, with points rising from 0.3 to 0.47 (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 1.8%, following on from the previous week’s 0.1% decline, week-on-week.

The Refinance Index slid by 6% to the lowest level since Dec-2000, in the week ending 7th September, following the previous week’s 1% fall, with the share of refinance mortgages falling from 38.9% to 37.8%.

The Mortgage Bankers Association also released its latest mortgage credit availability report, which reported that the Mortgage Credit Availability Index (“MCAI”) fell by 0.3% to 183.5 in August.

A fall in the MCAI is indicative of tightening lending standards, while in contrast, a rise indicates a loosening of credit standards. The Conventional MCAI fell by 0.9%, while the Government MCAI rose by 0.1%. Looking at the components of the MCAI, the Jumbo MCAI fell by 2.1%, while the Confirming MCAI increased by 0.8%.

The fall in overall credit availability was the first in 4-months, with the Jumbo MCAI reportedly sliding from its record high reached in July.

Falling mortgage applications, rising mortgage rates and a tightening in overall credit availability is a bad combination for the housing sector that is already under pressure as median house prices decline, the median sales price of houses sold in the U.S falling from a 4th quarter 2017 peak $337,900 to a 2nd quarter 2018 $309,800.

While by historical standards, median sales price are still well above historical levels, median sales prices’ previous peak sitting at a pre-Global Financial Crisis $257,400 back in the 1st quarter of 2007 (according to figures released by the Federal Reserve Bank of St Louis), the fall in mortgage applications attributed to inflated property prices and rising mortgage rates will be of concern. Strong labour market conditions and a pickup in wage growth are capable of fuelling the rental market at the expense of house prices that could ultimately hit the U.S economy should U.S households begin tighten the purse strings.

For the retail sector and inflation, a downward trend on house prices would ease inflationary pressures on retail goods as rental costs decline, leading to the ability to reduce mark ups that have been needed to maintain margins, though how quickly retailers respond to falling rates is ultimately key, falling house prices and stable retail prices certainly a negative for the sector and the U.S economy as a whole.

For the week ahead, economic data scheduled for release out of the U.S is on the lighter side, but not lacking influence. NY State and Philly manufacturing PMI numbers will provide further guidance on the state of the U.S economy amidst the ongoing trade spat with China. For the housing sector, August building permits, housing starts and existing home sales will give further direction on the housing sector, which appears to have peaked.

Outside of the data, with the FED now into its silent period, the Oval Office will likely have the ultimate influence on yields and ultimately mortgage rates through the week.

U.S Mortgages – Up for a 2nd Consecutive Week

Mortgage rates were on the rise in the week ending 6th September, a second consecutive week of gains coming off the back of 3 consecutive weeks of decline.

Economic data released though the week to Thursday provided support to the upward move in mortgage rates, with better than expected ISM manufacturing and non-manufacturing PMI numbers for August and some hawkish FOMC member commentary driving U.S Treasury yields higher through the week.

In spite of the positive sentiment towards the economy and a pickup in wage growth, according to official labour market figures released on Friday, affordability continues to be cited as an issue for prospective home buyers and the outlook for the real estate sector. Rising inflation, house prices and mortgage rates have ultimately led to the decline in housing sales, though a lack of inventory is also a factor.

The rise in yields and mortgage rates came in spite of continued concerns over the ongoing trade war between the U.S and China that saw the global equity markets see red through the week.

Freddie Mac weekly average rates for new mortgages as of 6th September were quoted to be:

  • 30-year fixed rate loan increased from 4.52% to 4.54% in the week, while up from 3.78% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates rose from 3.97% to 3.99% in the week, while up from 3.08% from a year ago. The average fee fell from 0.5 points to 0.4 points.
  • 5-year fixed rates increased from 3.85% to 3.93% in the week, while up from last year’s 3.15%. The average remained unchanged at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 31st August were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.77% to 4.79%, with points decreasing from 0.75 to 0.69 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances increased from 4.78% to 4.80%, with points easing from 0.42 to 0.43 (incl. origination fee) for 80% LTV loans..
  • Average 30-year rates for jumbo loan balances decreased from 4.68% to 4.67%, with points holding steady at 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, fell by 0.1%, following on from the previous week’s 1.7% decline, week-on-week.

The Refinance Index decreased by 1% in the week ending 31st August, following the previous week’s 3% slide, with the share of refinance mortgages rising from 38.7% to 38.9%.

The Mortgage Bankers Association also released its quarterly delinquency report for the 2nd quarter mid-week, with only 0.03% of the balance of commercial and multifamily mortgages held by life insurance companies being delinquent. Delinquency rates for the balance of multifamily mortgages held by Freddie Mac were also particularly low at 0.01%.

For loans held on bank balance sheets, the delinquency rate was the lowest in the series history, supported by rising property prices and a stable real estate environment, together with historically low interest rates, rising wages and a stable labour market.

Based on the unpaid principal balance (UPB) of loans, delinquency rates for five of the largest investor groups that account for more than 80% of commercial / multifamily mortgage debt outstanding were as follows:

  • Banks and thrifts (90 or more days delinquent or in non-accrual): 0.5%, down by 0.01 from the 1st
  • Life company portfolios (60 or more days delinquent): 0.03%, an increase of 0.01 percentage points from the 1st
  • Fannie Mae (60 or more days delinquent): 0.10%, a decrease of 0.03 percentage points from the 1st
  • Freddie Mac (60 or more days delinquent): 0.01%, a decrease of 0.01 from the 1st
  • CMBS (30 or more days delinquent or in REO): 3.52%, a decrease of 0.41 percentage points from the 1st

For the week ahead, it’s another busy week on the data front, with key stats out of the U.S including August wholesale and consumer inflation figures, along with the weekly jobless claims and July JOLTs job openings. Following last week’s labour market figures, any pickup in wholesale or consumer price inflation would provide further upside for U.S Treasury yields that could see mortgage rates rise for a 3rd consecutive week.

While forecasts for the stats in the week ahead are expected to be Dollar and yield positive, it’s not just the numbers that the markets will need to focus on, with demand for U.S Treasuries continuing to pin back Treasury yields and mortgage rates from more material gains, though even Trump’s threat of tariffs on an additional $267bn worth of Chinese goods, on top of the planned rollout of tariffs on the $200bn, was unable to offset the effects of a jump in wage growth and better than expected nonfarm payrolls on Friday.

U.S Mortgages – Rise For The First Time in 4-Weeks

Mortgage rates were on the rise in the week ending 30th August, bringing to an end a downward trend that saw rates fall for 3 consecutive week.

The moves through the week were relatively modest, with mortgage rates having remained relatively flat through the summer, following a sharp rise through the early part of the year.

Economic data through the week supported 10-year Treasury yields, with August consumer confidence numbers impressing on Tuesday and 2nd estimate GDP numbers for the 2nd quarter coming in ahead of expectations and up from 1st estimates, with the FED’s preferred Core PCE Price Index numbers also showing a slight pickup in the annual rate of core inflation in July.

On the housing front, the S&P / CS HPI Composite – 20 n.s.a showed that house prices rose by 6.3% in June, year-on-year, down from 6.5% in May, while pending home sales slid by 0.7% in July, reversing June 1% rise, as affordability continues to be an issue for prospective home buyers.

While mortgage rates have settled, inventories had supported house prices through the early part of the year, with the jump in mortgage rates impacting prospective buyers, with wage growth having remained relatively tepid amidst an inflation accelerating environment.

A slowdown in house price appreciation, a pickup in wage growth, a steadying in mortgage rates and a strong economy all support the housing sector, but with new home sales and existing home sales on the slide in July, the housing starts and building permit figures are going to need to see a sharp increase before the winter kicks in to support prospective home buyers.

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

  • 30-year fixed rate loan increased from 4.51% to 4.52% in the week, while up from 3.82% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates fell from 3.98% to 3.97% in the week, while up from 3.12% from a year ago. The average fee remained unchanged at 0.5 points.
  • 5-year fixed rates increased from 3.82% to 3.85% the week, while up from last year’s 3.14%. The average remained unchanged at 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 24th August were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 4.82% to 4.77%, with pints increasing from 0.69 to 0.75 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances fell from 4.81% to 4.78%, its lowest rate since the week ending 20th July 2018 with points rising from 0.42 to 0.46 (incl. origination fee) for 80% LTV loans..
  • Average 30-year rates for jumbo loan balances remained unchanged at 4.68%, with points rising from 0.28 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, fell by 1.7%, partially reversing the previous week’s 4.2% rise, week-on-week.

The Refinance Index decreased by 3% in the week ending 24th August, partially reversing the previous week’s 6% rise, with the share of refinance mortgages remaining unchanged at 38.7%.

For the week ahead, while it’s a shortened week in the U.S, with the markets closed for Labour Day, it’s a particularly busy week on the data front, with key stats through the week including the market’s preferred ISM private sector PMI numbers for August, July factory orders, 2nd quarter nonfarm productivity and unit labour cost numbers and the all-important wage growth and nonfarm payroll figures, with the ADP nonfarm employment change numbers on Thursday to provide some guidance ahead of Friday’s official figures.

2nd quarter GDP numbers may have eased any immediate concerns over the effects of the ongoing trade war with China on the U.S economy and solid numbers in the week ahead would further alleviate, though we would expect early 4th quarter economic indicators to be more reflective of an extended trade war.

While the stats could provide some upward pressure on U.S Treasury yields and ultimately mortgage rates, sentiment towards the ongoing trade war between the U.S and China may overshadow the numbers, particularly following Canada’s failure to close out NAFTA talks by Friday’s deadline.

Demand for U.S Treasuries amidst the ongoing trade war between the U.S and China has pinned back yields and mortgage rates through the summer and with talks of Trump looking to withdraw the U.S from the WTO and to add more tariffs on China, risk aversion could provide prospective home owners with more relief.

The good news for now is that the U.S economy has managed to hold up, the bad news down the road could be the side-effects of a trade war on labour market conditions and ultimately the housing market, an extended trade war tending to be a negative for all.

U.S Mortgages – Down for a 3rd Consecutive Week

Mortgage rates slipped again in the week ending 23rd August, with a 3rd consecutive week of decline seeing mortgage rates fall to levels not seen since April, according to figures released by Freddie Mac.

Economic data released through the week was on the lighter side, with key stats through to Thursday including July existing home and new home sales, together with August prelim private sector PMI numbers, with the FOMC monetary policy meeting minutes also there to influence the direction of Treasury yields through the week.

Weaker than expected private sector PMI numbers continued to raise concerns over the effects of the ongoing trade war with China, with trade talks between the U.S and China on Wednesday and Thursday making little progress to spur a sell-off in U.S Treasuries to drive mortgage rates northwards.

Downward pressure on Treasury yields also came from concerns over President Trump being implicated in the ongoing investigations into the U.S Presidential Campaign and possible collusion with the Russians.

While the FOMC meeting minutes continued to signal a September rate hike, concerns over the ongoing trade war and the need to monitor incoming data ahead of the September meeting also led to increased demand for U.S Treasuries, providing further respite to prospective home buyers.

Of greater concern however will be recent figures from the housing sector, with last week’s existing home sales and new home sales numbers continuing to fall in July, new home sales sliding by 1.7% month-on-month, following a 2.4% fall in June. Existing home sales were down 0.7%, following a 0.6% fall in June, with inventories and affordability contributing to the downward trend.

Freddie Mac weekly average rates for new mortgages as of 23rd August were quoted to be:

  • 30-year fixed rate loan decreased from 4.53% to 4.51% in the week, while up from 3.86% a year ago. The average fee remained unchanged at 0.5 points.
  • 15-year fixed rates fell from 4.01% to 3.98% in the week, while up from 3.16% from a year ago. The average fee remained unchanged at 0.5 points.
  • 5-year fixed rates decreased from 3.87% to 3.82% the week, while up from last year’s 3.17%. The average fee eased from 0.4 points to 0.3 points.

Mortgage Bankers’ Association Rates for the week ending 17th August were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 4.77% to 4.82%.
  • Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 4.81%.
  • Average 30-year rates for jumbo loan balances decreased from 4.73% to 4.68%.

Weekly figures released by the Mortgage bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, rose by 4.2%, more than reversing the previous week’s 2.0% fall, week-on-week.

The Refinance Index increased by 6% in the week ending 17th August, after having held steady the previous week, with the share of refinance mortgages rising from 37.6% to 38.7%, marking a 2nd consecutive increase in share of total mortgages.

The Mortgage Bankers Association also released its quarterly Survey of Commercial / Multifamily Mortgage Bankers Originations for the 2nd quarter of 2018.

  • 2nd quarter 2018 commercial and multifamily loan originations were 4% higher than during the 2nd quarter of 2017 and 32% higher than in the 1st quarter of 2018.
  • Investor demand for multifamily properties and hotels were attributed to the rise in originations.
  • Year-on-year, loans for hotel properties increased by 22%, with loans for multifamily properties rising by 17%, in Dollar terms.
  • Quarter-on-quarter, originations for hotel properties surged by 89%, with originations for multifamily properties rising by 25%. Originations for retail properties rose by 87% and by 36% for office properties.

For the week ahead, there may be further respite following FED Chair Powell’s speech from Jackson Hole on Friday, where the emphasis was on gradual rate hikes, while highlighting the risks of moving too quickly and slowing the economy.

On the data front, key stats for the week ahead include August consumer confidence figures on Tuesday, 2nd estimate GDP numbers and pending home sales on Wednesday and the FED’s preferred Core PCE Price Index figures along with personal spending numbers on Thursday.

For those looking for a new home, the downward trend in mortgage rates may be providing some respite, though with inventories continuing to be a major obstacle, a continued slide in housing sales may raise concerns of a price correction that could see a shift in the balance between inventories and demand. Mortgage rates may be at 4-month lows, but rushing in to buy a property, likely priced at the high end of the affordability scale, may not be so wise should rising concerns over the sector lead to a price correction.

As things stand, strong labour market conditions should continue to support demand, though sales will need to improve to restore confidence and that needs more inventories.