In the week ending 17th March, mortgage rates surged to 4% levels for the first time since 2019.
30-year fixed rates surged by 31 basis points to 4.16%. 30-year fixed rates had risen by 9 basis points in the week prior.
Year-on-year, 30-year fixed rates were up by 107 basis points.
30-year fixed rates were still down by 78 basis points since November 2018’s last peak of 4.94%.
Economic Data from the Week
In the first half of the week, wholesale inflation and retail sales were the key stats. The numbers were dollar negative.
The core producer price index increased by 0.2% in February, softer than a 1.0% rise in January.
More significantly, retail sales were also disappointing. Core retail sales rose by just 0.2%, with retail sales up 0.3% in February. Both had seen marked increases in the month prior.
While the stats disappointed, a FED rate hike and hawkish interest rate projections drove mortgage rates back to 4%. Hopes of a ceasefire in Ukraine and Beijing economic stimulus supported demand for riskier assets, delivering further upside for U.S Treasury yields.
Freddie Mac Rates
The weekly average rates for new mortgages, as of 17th March, were quoted by Freddie Mac to be:
According to Freddie Mac,
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Mortgage rates exceeded 4% for the first time since May 2019.
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The FED raising short-term rates and projecting further increases point to further increases in mortgage rates.
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While demand for homes has moderated, low inventories keep the housing sector competitive, suggesting further increases in house prices.
Mortgage Bankers’ Association Rates
For the week ending 11th March, the rates were:
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Average interest rates for 30-year fixed with conforming loan balances rose from 4.09% to 4.27%. Points increased from 0.44 to 0.54 (incl. origination fee) for 80% LTV loans.
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Average 30-year fixed mortgage rates backed by FHA increased from 4.12% to 4.23%. Points fell from 0.73 to 0.62 (incl. origination fee) for 80% LTV loans.
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Average 30-year rates for jumbo loan balances increased from 3.79% to 4.02%. Points fell from 0.39 to 0.37 (incl. origination fee) for 80% LTV loans.
Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, decreased by 1.2% in the week ending 11th March. The index had increased 8.5% in the previous week.
The Refinance Index declined 3% and was 49% lower than the same week a year ago. In the week prior, the index increased by 9%.
The refinance share of mortgage activity decreased from 49.5% to 48.4%. In the previous week, the share fell from 49.9% to 49.5%.
According to the MBA,
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Mortgage rates continue to be volatile due to the significant uncertainty regarding FED policy and the war in Ukraine.
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Investors are considering the impacts of rapidly increasing inflation in the U.S and the world against the possible slowdown in growth due to supply-chain disruption.
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30-year fixed mortgage rate increased to 4.27%, the highest since May 2019.
For the week ahead
It’s a particularly quiet start to the week, with no major U.S stats for the markets to consider. While there are no stats, FED Chair Powell is scheduled to speak on Monday and Wednesday. Expect any monetary policy chatter to influence Treasury yields.
Away from the economic calendar, news updates on Russia and Ukraine will also continue to dictate the direction for U.S Treasuries.
This article was originally posted on FX Empire
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