Mortgage rates rose once more in the week ending 20th February. A 2nd consecutive weekly rise did little to reverse a run of 3 consecutive weeks in the red, however, that had left rates at the lowest level since Oct-16.
According to Freddie Mac, the low mortgage rate environment continues to fuel home buying activity. Home purchasing applications were up by 15% from a year ago.
New residential construction has surged over the last few months, on pace to reach the highest level in more than a decade.
Hopes are for inventories to lead to a strong homebuying spell in the spring, according to figures released by Freddie Mac.
Year-on-year, 30-year fixed rates were down by 86 basis points.
30-year fixed rates were also down by 145 basis points since November 2018’s most recent peak of 4.94%.
Economic Data from the Week
Economic data was on the lighter side through the first half of the week.
Key stats included manufacturing figures out of NY State and Philly and wholesale inflation figures for January.
The stats were skewed to the positive and supported FED Chair Powell’s views on the U.S economic outlook.
FOMC meeting minutes on Wednesday led to a slight pullback in U.S Treasury yields but not enough to lead to a fall in mortgage rates.
From the housing sector, January building permits jumped by 9.2%, while housing starts fell by just 3.6% following a 17.7% jump in December.
As highlighted by Freddie Mac, the housing sector is set for a boost in activity come spring, supported by the numbers.
While economic data was skewed to the positive, rising coronavirus related deaths outside of China drove demand for Treasuries later in the week.
Freddie Mac Rates
The weekly average rates for new mortgages as of 20th February were quoted by Freddie Mac to be:
- 30-year fixed rates increased by 2 basis points to 3.49% in the week. Rates were down from 4.35% from a year ago. The average fee remained unchanged at 0.7 points.
- 15-year fixed rose by 2 basis points 2.99% in the week. Year-on-year, rates were down from 3.78%. The average fee remained unchanged at 0.8 points.
- 5-year fixed rates decreased by 3 basis points to 3.25% in the week. Rates were down by 59 points from last year’s 3.84%. The average fee fell from 0.3 to 0.2 points.
Mortgage Bankers’ Association Rates
For the week ending 14th February, rates were quoted to be:
- Average interest rates for 30-year fixed, backed by the FHA, increased from 3.84% to 3.86. Points decreased from 0.26 to 0.24 (incl. origination fee) for 80% LTV loans.
- Average interest rates for 30-year fixed with conforming loan balances increased from 3.72% to 3.77%. Points remained unchanged at 0.28 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances increased from 3.75% to 3.79%. Points increased from 0.17 to 0.19 (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 6.4% in the week ending 14th February. In the week ending 7th February, the Index had increased by 1.1%.
The Refinance Index slid by 8% from the previous week and was 165% higher than the same week a year ago. The Index had increased by 5% to hit the highest level since June 2013 in the previous week.
The refinance share of mortgage activity decreased from 65.5% to 63.2% in the week ending 14th February. In the week prior, the refinance share had increased from 64.5% to 65.5%.
According to the MBA, U.S Treasury yields picked up last week, despite uncertainty over the economic outlook and the spread of the coronavirus.
The pickup in yields led to a 5 basis point rise in 30-year fixed mortgage rates in the week, leading to a slide in refinancing activity. Despite the slide in the refinance index, it was still at its 3rd highest reading of 2020.
The MBA also noted that, while purchase applications fell by 3% last week, activity was still 10% higher than a year ago.
For the week ahead
It’s a relatively busy week ahead on the U.S economic calendar. Key stats include consumer confidence figures due out on Tuesday. On Thursday, durable goods and 2nd estimate GDP numbers on will also influence.
For U.S Treasury yields, barring a downward revision to GDP numbers, consumer confidence will need to hold firm.
The markets are expecting the U.S economy to see limited impact from the spread of the coronavirus. Any marked slide in confidence and expect demand for U.S Treasuries to spike, particularly after last week’s Services PMI.
Based on forecasts, durable goods orders are unlikely to have too much impact, with mixed results anticipated. Expect core durable goods orders to have the greatest influence, however.
From the housing, December house price figures and January new home sales numbers will also be in focus.
Expect new home sales figures to support yields. Solid labor market conditions and January pullback in mortgage rates are positives for the sector.
From elsewhere, updates from China and beyond on the spread of the coronavirus and measures to limit the economic impact will also provide direction.
This article was originally posted on FX Empire
