U.S Mortgage Rates See Modest Increase with Labor Market Conditions

On Sep 26, 2021

Mortgage rates rose modestly, with 30-year fixed rates increasing by just 2 basis points, reversing a 2 basis points fall from the week prior. The weekly increase was just the 5^th in 10-weeks.

In the week ending 23^rd September, 30-year fixed rates rose by 2 basis points to 2.88%.

30-year mortgage rates have risen just once beyond the 3% mark Since 21^st April.

Compared to this time last year, 30-year fixed rates were down by 2 basis points.

30-year fixed rates were still down by 206 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a relatively quiet first half of the week, with housing sector data in focus.

In August, building permits jumped by 6%, with new housing starts rising by 3.9%. Following a 6.2% sliding in housing starts in July, a pickup in new inventories would ease inventory shortages.

Existing home sales declined by 2.0%, reversing a 2.2% increase from July.

The numbers had a muted impact on yields and mortgage rates, however, with the FED in focus on Wednesday.

On Wednesday, the FED left monetary policy unchanged and also held back on committing a date to begin tapering. Interest rate projections and the FOMC dot plot chart revealed a divided Committee, with some supporting rate hikes next year.

Freddie Mac Rates

The weekly average rates for new mortgages as of 23^rd September were quoted by Freddie Mac to be:

According to Freddie Mac,

The slowdown in economic growth around the world has caused a flight to the quality of U.S financial markets.
This has led to a rise in foreign investor purchases of U.S Treasuries, causing mortgage rates to remain in place, despite increasing dispersion of inflation across different consumer goods and services.

Mortgage Bankers’ Association Rates

For the week ending 17^th September, the rates were:

Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 3.03%. Points decreased from 0.32 to 0.30 (incl. origination fee) for 80% LTV loans.
Average 30-year fixed mortgage rates backed by FHA rose from 3.04% to 3.07%. Points fell from 0.27 to 0.25 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances decreased from 3.13% to 3.11%. Points increased from 0.21 to 0.25 (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 4.9% in the week ending 17^th September. In the previous week, the index had increased by 0.3%.

The Refinance Index increased by 7% and was 5% lower than the same week one year ago. The index had declined by 3% in the week prior.

In the week ending 17^th September, the refinance share of mortgage activity increased from 64.9% to 66.2%. The share had fallen from 66.8% to 64.9% in the previous week.

According to the MBA,

There was a resurgence in mortgage applications after Labor Day, with overall activity at its highest level in over…