U.S Mortgage Rates Slide to Another Record Low Ahead of This Week’s FOMC

Mortgage rates hit reverse once more in the week ending 10th September.

30-year fixed rates slid by 7 basis points to a new low 2.86%, reversing a 2 basis point rise to 2.93% in the week prior.

Compared to this time last year, 30-year fixed rates were down by 70 basis points.

30-year fixed rates were also down by 208 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the quieter side in the 1st half of the week.

Key stats included July’s JOLT’s job openings, inflation, and the weekly jobless claims figures.

It was a mixed bag from the U.S. While inflation and job openings were skewed to the positive, the jobless claims disappointed.

Wholesale inflation came in ahead of forecasts,  though inflationary pressures softened in August. By contrast, the core annual rate of inflation picked up from 1.6% to 1.7% in the month.

In the week ending 4th September, initial jobless claims stood at 884k, which was worse than a forecasted 446k. In the week prior, however, claims had also come in at 884k.

While the stats were mixed, a continued slide in U.S tech stocks weighed on Treasury yields, sending mortgage rates south.

Freddie Mac Rates

The weekly average rates for new mortgages as of 10th September were quoted by Freddie Mac to be:

  • 30-year fixed rates decreased by 7 basis points to 2.86% in the week. Rates were down from 3.56% from a year ago. The average fee remained unchanged at 0.8 points.
  • 15-year fixed rates fell by 5 basis points to 2.37% in the week. Rates were down from 3.09% compared with a year ago. The average fee decreased from 0.8 points to 0.7 points.
  • 5-year fixed rates jumped by 18 basis points to 3.11% in the week. Rates were down by 25 points from last year’s 3.36%. The average fee remained unchanged at 0.2 points.

According to Freddie Mac,

  • Mortgage rates have hit another record low. This was attributed to a late-summer slowdown in economic recovery.
  • These low rates have ignited robust purchase demand activity, which is up 25% from a year ago.
  • Additionally, purchase demand activity has been growing at double-digit growth rates for 4 months in a row.
  • However, heading into the fall, it will be difficult to sustain the growth momentum in purchases due to the lack of supply.
  • This lack of supply is already reining back sales activity.

Mortgage Bankers’ Association Rates

For the week ending 4th September, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, decreased from 3.19% to 3.16%. Points increased from 0.34 to 0.42 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances decreased from 3.08% to 3.07%. Points remained unchanged at 0.36 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.41% to 3.40%. Points decreased from 0.41 to 0.40 (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 2.9% in the week ending 4th September. In the week prior, the index had decreased by 2%.

The Refinance Index increased by 3% and was 60% higher than the same week a year ago. In the previous week, the index had fallen by 3%.

The refinance share of mortgage activity increased from 62.5% to 63.1%. In the week prior, the share had slipped from 62.6% to 62.5%.

According to the MBA,

  • Mortgage rates were in decline, with a noteworthy 5-basis point fall in the 15-year fixed-rate delivering a record low 2.62%.
  • The drop in rates led to a rebound in refinancing activity, driven by borrowers applying for conventional loans.
  • Purchase applications were 40% higher than the same week a year ago. The increase was skewed higher by being compared to Labor Day 2019.

For the week ahead

It’s a busy 1st half of the week on the U.S economic calendar.

Key stats include August industrial production and retail sales figures, together with the weekly jobless claims numbers.

NY Empire State and Philly FED manufacturing numbers for September are also due out and will influence.

From elsewhere, industrial production and retail sales figures from China will also influence market risk sentiment.

The key driver for the week, however, will be the FOMC interest rate decision and FOMC projections…

On the geopolitical front, there’s also Brexit and U.S-China relations to monitor.

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