Mortgage rates fell back to sub-3% levels after having broken above for just the 2nd time since 21st April.
In the week ending 7th October, 30-year fixed rates slipped by 2 basis points to 2.99%.
Compared to this time last year, 30-year fixed rates were up by 12 basis points.
30-year fixed rates were still down by 195 basis points since November 2018’s last peak of 4.94%.
Economic Data from the Week
It was a busier start to the week on the U.S economic data front. Key stats included factory orders, service sector PMI, and ADP nonfarm employment figures.
The stats were skewed to the positive ahead of the end of the week’s all-important labor market data.
Factory orders increased by 1.2% in August, following a 0.7% rise in July. The market’s preferred ISM Non-Manufacturing PMI was also upbeat, rising from 61.7 to 61.9.
According to the ADP, nonfarm payrolls increased by 568k in September versus a forecasted 428k rise. In August, nonfarm payrolls had risen by 340k according to the ADP…
Freddie Mac Rates
The weekly average rates for new mortgages as of 7th October were quoted by Freddie Mac to be:
- 30-year fixed rates fell by 2 basis points to 2.99% in the week. This time last year, rates had stood at 2.87%. The average fee remained unchanged at 0.7 points.
- 15-year fixed decreased by 5 basis points 2.23% in the week. Rates were down by 14 basis points from 2.37% a year ago. The average fee rose from 0.6 points to 0.7 points.
- 5-year fixed rates rose by 4 basis point to 2.52%. Rates were down by 37 points from 2.89% a year ago. The average fee remained unchanged at 0.3 points.
According to Freddie Mac,
- Mortgage rates continue to hover at around 3% again this week due to rising economic and financial market uncertainties.
- Unfortunately, with the expectation that both mortgage rates and home prices will continue to rise, competition remains high and housing affordability is declining.
Mortgage Bankers’ Association Rates
For the week ending 1st October, the rates were:
- Average interest rates for 30-year fixed with conforming loan balances increased from 3.10% to 3.14%. Points increased from 0.34 to 0.35 (incl. origination fee) for 80% LTV loans.
- Average 30-year fixed mortgage rates backed by FHA rose from 3.09% to 3.12%. Points increased from 0.25 to 0.31 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances increased from 3.14% to 3.20%. Points decreased from 0.33 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, slid by 6.9% in the week ending 1st October. In the previous week, the index had fallen by 1.1%.
The Refinance Index tumbled by 10.0% and was 16% lower than the same week one year ago. The Index had declined by 1.0% in the week prior.
In the week ending 1st October, the refinance share of mortgage activity declined from 66.4% to 64.5% of total applications. The share had increased from 66.2% to 66.4% of total applications in the previous week.
According to the MBA,
- Mortgage applications to refinance dropped to the lowest level in 3-months, while 30-year fixed hit the highest level since July.
- Higher rates are reducing borrowers’ incentive to refinance.
- Purchase activity also fell, while the average loan balance failed to drop from $410,000 reached in the week prior.
- With home-price appreciation and sales prices remaining very elevated, applications for higher balance, conventional loans still dominate the mixed of activity.
For the week ahead
It’s another relatively busy first half of the week on the U.S economic calendar.
Key stats include Jolts’ job openings and, more significantly, September inflation figures.
While nonfarm payrolls disappointed last week, another pickup in inflationary pressure could force the FED’s hand. Expect yields to pick up and push mortgage rates northwards if inflationary accelerates once more.