U.S. mortgage rates hit 7th place in a row as economic data fuels optimism

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Mortgage rates were up for a 7e consecutive week in the week ending 1st April. Following an increase of 8 basis points compared to the previous week; The 30-year fixed rates rose a further 1 basis point to 3.18%.

Compared to the same period last year, fixed 30-year rates fell only 15 basis points.

30-year fixed rates are still down 176 basis points since the last peak in November 2018 at 4.94%.

Notably, however, it was only the fifth week plus 3% since July of last year and the highest rate in 10e June 2020, where the 30-year fixed rates stood at 3.21%.

Economic data of the week

It was another relatively quiet first half of a week on the US economic calendar.

On the economic data front, consumer confidence, the Chicago PMI and employment figures were the center of attention.

The statistics were biased towards the positive.

Consumer confidence improved further in March, with the CB Consumer Confidence Index rising from 90.4 to 109.7.

The ADP figures on the development of non-farm employment were also positive. The ADP reported a 517,000 increase in non-farm payrolls ahead of official government figures on Friday. The jump came after rising 176,000 in February.

Bullish sentiment towards the US economy added to the rise in the Chicago PMI from 59.5 to 66.3 in March.

Other statistics included data on the housing sector.

Pending home sales took a hit in February, falling 10.6%, while house prices saw a sharp increase in January.

The S & P / CS HPI Composite Index was up 11.0% year-on-year in January. In December, house prices rose only 0.2%.

Outside of the economic calendar, US government spending plans supported riskier assets during the week.

Freddie Mac Pricing

Average weekly rates for new mortgages at 1st April were cited by Freddie mac to be:

  • 30-year fixed rates rose 1 basis point to 3.18% on the week. Around the same time last year, rates stood at 3.33%. The average commission remained at 0.7 points.
  • 15-year fixed rates held steady at 2.45% for the week. Rates fell 37 basis points from 2.82% a year ago. The average commission remained at 0.6 point.
  • Fixed 5-year rates also held steady at 2.84%. Rates fell 56 points from 3.40% a year ago. The average commission went from 0.2 point to 0.3 point.

According to Freddie Mac,

  • Despite low mortgage rates, there is evidence of a decline in those looking to enter the housing market.
  • Demand from homebuyers has risen from 25% above pre-COVID levels at the start of to 8% above pre-COVID levels today.
  • Purchase demand has declined compared to late May and early June 2020, when mortgage rates were at the same level.
  • This confirms that the marginal buyer is feeling the tightening in affordability resulting from rising mortgage rates and house prices.

Mortgage Bankers Association rate

For the week ending 26e March, the rates were:

  • The 30-year average interest rates set on compliant loan balances declined from 3.36% to 3.33%. Points increased from 0.42 to 0.39 (including origination fees) for LTV loans at 80%.
  • The 30-year average fixed mortgage rates guaranteed by the FHA fell from 3.35% to 3.29%. Points increased from 0.41 to 0.34 (including origination fees) for LTV loans at 80%.
  • The 30-year average rates for jumbo loan balances declined from 3.40% to 3.34%. Points increased from 0.43 to 0.31 (including origination fees) for LTV loans at 80%.

Weekly figures released by the Mortgage Bankers Association showed that the Composite Market Index, which is a measure of the volume of mortgage applications, fell 2.2% in the week ending the 26th.e March. The previous week, the index had fallen 2.5%.

The refinancing index fell 3% from the previous week and was 32% lower than the same week a year ago. The index had fallen 4% the week before.

In the week ending 26e In March, the refinancing share of mortgage activity fell from 60.9% to 60.6%. The previous week, the share had fallen from 62.9% to 60.9%.

According to the MBA,

  • After 7 consecutive weeks of rising mortgage rates, the 30-year fixed rate fell by 3 basis points.
  • Despite the drop, rates remained almost half a percentage point higher than at the start of this year.
  • Mortgage applications for refinances and home purchases have both declined.
  • Buying activity was still convincingly higher than the pandemic-induced decline seen a year ago.
  • Many potential buyers are feeling the effects of rising rates and rapidly accelerating home prices this spring.
  • Record high inventories are pushing home price growth to double the rate of a year ago and above the 10% growth rates seen in 2005.
  • The housing market is in desperate need of more inventory to slow price growth and preserve affordability.
  • In addition, rising mortgage rates continue to dampen refinancing activities.

For the coming week

It’s another relatively quiet first half of a week on the US economic calendar. Key stats include ISM Non-Manufacturing PMI, Factory Orders, and JOLT Jobs.

Expect non-manufacturing ISM PMI numbers to have the biggest impact on US Treasury yields.

Outside of the economic calendar, the Capitol discussions on spending, comments from FOMC members and geopolitics will also influence.

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