U.S Mortgage Rates Inch Up as Applications Surge

Mortgage rates found support in the week ending 16th

January, rising by 1 basis point to 3.65%. In the week ending 9th

January, mortgage rates had fallen by 8 basis points to 3.6 4%.

In spite of the weekly increase, mortgage rates remained close to 14-week lows. 30-year rates also continued to hold close to levels last seen in early November of 2016, according to figures released by Freddie Mac.

Compared to this time last year, 30-year fixed rates were down by 80 basis

points.阿

30-year fixed rates are also down by 129 basis points since November

2018s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the lighter

side through the 1st half of the week, with December inflation

figures and the NY Empire State Manufacturing Index numbers in focus.

While the annual rate of core

inflation held steady at 2.3%, consumer prices rose at a softer pace in December,

pinning back yields.

Mixed sentiment towards the phase

1 trade agreement ahead of Wednesdays signing had also weighed on risk

appetite at the start of the week.

It was ultimately risk-on,

however, with the signing of the trade agreement and details on tariffs

supporting riskier assets.

Easing tensions between the U.S

and Iran also supported U.S Treasury yields, delivering the upside in mortgage

rates.

[fx-article-ad]Freddie Mac Rates

The weekly average rates for new mortgages as of 16th January were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 1 basis point to 3.65% in the week. Rates were down from 4.45% from a year ago. The average fee remained unchanged at 0.7 points.

• 15-year fixed rates rose by 2 basis points to 3.09 in the week. Rates were down from 3.88% compared with a year ago. The average remained unchanged at 0.7 points.

• 5-year fixed rates jumped by 9 basis points to 3.39% in the week. Rates were down by 48 basis points from last years 3.87%. The average fee held steady at 0.3 points.

According to Freddie Mac, mortgage rates remain low and, supported by a strong labor market, continues to drive a consumer-driven economy. Purchasing power remains key for the economy, though with the worsening homeowner and rental affordability due to supply constraints, some influence on affordability and demand is expected.

Mortgage Bankers

Association Rates

For the week ending 10th January, rates were quoted to be:

• Average interest rates

  for 30-year fixed, backed by the FHA, decreased from 3.85% to 3.78%, the lowest

  level since Oct-19. Points rose from 0.23 to 0.30 (incl. origination fee) for

  80% LTV loans.

• Average interest rates

  for 30-year fixed with conforming loan balances fell from 3.91% to 3.87, the

  lowest level since Sep-19. Points decreased from 0.34 to 0.32 (incl.

  origination fee) for 80% LTV loans.

• Average 30-year rates for jumbo loan balances decreased from 3.88% to 3.83%, its lowest level since Nov-16. Points increased from 0.17 to 0.24 (incl. origination fee) for 80% LTV loans.

Applications and Refinancing

Weekly figures released by the Mortgage Bankers

Association showed that the Market Composite Index, which is a measure of mortgage

loan application volume, surged by 30.2% in the week ending 10th

January. The composite index had fallen by 1.5% in the week ending 3rd

January 2020, compared with 2-weeks prior.

The Refinance Index surged by 43% from the previous week and was up by

109% from the same week one year ago. The Index had fallen 8% from 2-weeks

prior in the week ending 3rd January.

The refinance share of mortgage activity increased from 58.9% to 62.9% in the week. In the week prior, the refinance share of mortgage activity had increased from 54.8 to 58.9%.

MBA Comments

According to the MBA, the mortgage market got off to a strong start in

the new decade. Applications were on the rise across the broader and mortgage

rates slid to levels last seen in the 3rd quarter.

Homebuyer activity was up by 8% from a year ago, leading the purchase index to its highest level since Oct-09…

A lack of inventories and upward price pressure driven by demand are negatives near-term, however.

For the week ahead

Its a quiet week ahead, with key

stats due out of the U.S including December existing home sales figures on

Wednesday and the weekly jobless claims figures on Thursday.

Barring dire numbers, the stats

are unlikely to have too much influence, leaving yields in the hands of

corporate earnings.

Outside of the stats, expect

geopolitics to continue to give U.S Treasuries direction.