Mortgage rates fell for a 2nd consecutive week, marking a 2nd decline in 5-weeks.
The fall also saw 30-year fixed rates fall back to sub-3% after having held above the 3% mark for 4 weeks in a row.
In the week ending 11th November, 30-year fixed rates slid by 11 basis points to 2.98%.
Compared to this time last year, 30-year fixed rates were up by 14 basis points.
30-year fixed rates were still down by 196 basis points since November 2018’s last peak of 4.94%.
Economic Data from the Week
It was a relatively busy first half of the week on the U.S economic calendar, with inflation in focus.
In October, the core producer price index rose by 0.4% after having increased by 0.2% in September. The producer price index rose by 0.6% following a 0.5% increase in September.
Economists had forecast the core PPI to rise by 0.5% and for the PPI to increase by 0.6%.
The annual core rate of wholesale inflation held steady at 6.8%, which was in line with forecasts.
Of greater significance, however, were consumer price inflation.
Consumer prices rose by 0.9% in October following a 0.4% increase in September.
More significantly, the core annual rate of inflation accelerated from 4.0% to 4.6. Economists had forecast an annual core inflation rate of 4.3%.
Month-on-month, core consumer prices increased by 0.6% following a 0.2% rise in the month prior.
On the labor market front, jobless claims failed to draw attention, with the inflation figures taking the limelight.
In the week ending 5th November, initial jobless claims fell from 271k to 267k.
Freddie Mac Rates
The weekly average rates for new mortgages as of 11th November were quoted by Freddie Mac to be:
- 30-year fixed rates slid by 11 basis points to 2.98% in the week. This time last year, rates had stood at 3.12%. The average fee remained unchanged at 0.7 points.
- 15-year fixed fell by 8 basis points to 2.27% in the week. Rates were down by 7 basis points from 2.34% a year ago. The average fee remained unchanged at 0.6 points.
- 5-year fixed rates slipped by 1 basis point to 2.53%. Rates were down by 58 points from 3.11% a year ago. The average fee remained rose from 0.3 points to 0.4 points.
According to Freddie Mac,
- Despite the re-acceleration of economic growth, the recent bond rally drove mortgage rates down for a 2nd consecutive week.
- These low mortgage rates, combined with the tailwind of first-time buyers entering the market, means that purchase demand will remain strong into next year.
- Affordability pressures, however, continue to be an ongoing concern for homebuyers.
Mortgage Bankers’ Association Rates
For the week ending 5th November, the rates were:
- Average interest rates for 30-year fixed with conforming loan balances decreased from 3.24% to 3.16%. Points remained unchanged at 0.34 (incl. origination fee) for 80% LTV loans.
- Average 30-year fixed mortgage rates backed by FHA fell from 3.29% to 3.18%. Points declined from 0.38 to 0.31 (incl. origination fee) for 80% LTV loans.
- Average 30-year rates for jumbo loan balances decreased from 3.29% to 3.26%. Points rose from 0.27 to 0.32 (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 5th November. In the previous week, the index had decreased by 3.3%.
The Refinance Index rose by 7% and was 28% lower than the same week a year ago. In the week prior, the index had declined by 4%.
The refinance share of mortgage activity increased from 61.9% to 63.5% of total applications in the week ending 5th November. In the precious week, the share had decreased from 62.2% to 61.9%.
According to the MBA,
- Mortgage rates moved lower for the second week in a row for all loan types.
- While overall activity remains close to Jan-2020 lows, homebuyers acted on the decrease in rates.
- The average loan balance for a refinance application was the highest in a month.
- While the dip in rates may have helped bring some buyers back into the market housing inventory remains extremely low and price growth remains elevated.
For the week ahead
It’s a busy first half of the week on the U.S economic calendar.
On Tuesday, retail sales figures will be the key stats of the week. With inflationary pressures picking up, the markets will be looking to see the impact of inflation on consumption.
Expect weak numbers to bring into question the FED’s current transitory view and willingness to allow prices to remain elevated.
Other stats include NY Empire State Manufacturing, industrial production, and housing sector data.
We expect these stats to play second fiddle to the retail sales data, however.