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Two takeaways on mortgage rate data

Point 1: Reported mortgage rates are high, but lower than their long-run average.

The red line in the FRED graph above shows reported 30-year fixed mortgage rates. We can see they’re quite a bit higher now than they were a year ago, but lower than they’ve been for more than half of their recorded history.

Point 2: These reported rates apply only to mortgage applications and don’t seem to have affected existing mortgages.

The blue line in the graph shows the proportion of income that households dedicate to mortgage servicing. The recent spike in rates doesn’t seem to have affected the interest load for current mortgages, given that the blue line has barely moved.

Again, these mortgage statistics describe new mortgages, not existing mortgages. Traditionally, mortgage data have come from surveying mortgage originators, asking them for the going rate of new first-lien, conforming, conventional mortgages issued to households with excellent credit and a 80% loan-to-value ratio. But since November 2022, administrative data from Freddie Mac’s underwriting system have been used instead of the survey data. These data include rates for mortgage applications, which may never be issued as actual mortgages. The results are very similar, but it is a broader sample being used. For more details, see this report.

How this graph was created: Search FRED for “mortgage debt service.” On the graph, click “Edit Graph,” open the “Add Line” tab, and search for “mortgage rate,” selecting the 30-year fixed-rate series.

Suggested by Christian Zimmermann.

It’s only teenage workforce

Data on labor trends for teens vs. seniors

The overall labor force participation rate (LFRP) remains below its pre-pandemic level: 62.5% in February 2023 vs. 63.3% in February 2020. And disaggregating the data by age reveals some interesting trends.

The LFPR rates for adults 55 and older (in blue) and teens (in red) form the double-helix-like graph above. A few things stand out: First, teens were more likely to be in the labor force than seniors prior to the Global Financial Crisis in 2007. In August 1989, the LFPR for teens (57.4%) was almost twice that of seniors (30.1%). However, this gap closed throughout the 1990s and 2000s, and in October 2008 seniors became more likely to be in the labor force than teens.

But this has started to change again. After reaching an all-time low of 32.5% in February 2014, the teen LFPR started to rise again. It’s risen even more steadily after the pandemic, returning to pre-pandemic levels after a year; and in recent months it has reached its highest level since 2009. In contrast, the share of seniors in the labor force dropped after the pandemic and has shown no sign of recovery; in February 2023, it stood at its lowest level since before the Global Financial Crisis.

Two key pandemic trends are driving this. First, many older workers left the labor force during the pandemic due to health concerns or rising asset values. Miguel Faria e Castro has estimated that there were more than 2.4 million excess retirements from February 2020 to August 2021. Second, the tight labor market has led to more job opportunities for teen workers; with wages up and firms more willing to train and employ teens, college enrollment has declined and more teens are moving into the workforce.

How this graph was created: Search FRED for “Labor Force Participation Rate – 55 Yrs. & over.” Click “Edit Graph,” open the “Add Line” tab, and add “Labor Force Participation Rate – 16-19 Yrs.”

Suggested by Nathan Jefferson.

The lender of last resort

Data on bank loans made by the Fed

The Federal Reserve System serves as a “lender of last resort” for insured financial institutions in the US by providing liquidity to commercial banks, thrift institutions, credit unions, or US branches and agencies of foreign banks. The liquidity provided by the Fed takes the form of loans, which are collateralized and have historically been paid back in full, on time, and with interest. The amount and types of these loans have changed recently.

The FRED graph above shows the dollar amount of each of the six types of loans the Fed currently makes available to depository institutions:

  • The first three series (Primary Credit in blue, Secondary Credit in red, and Seasonal Credit in green) show the value of loans offered through the discount window. This lending program provides depository institutions with ready access to funding and has been in operation since 1914.
  • The fourth series (the purple area) is the Payroll Protection Program Liquidity Facility. This was a term, or temporary, program created during the COVID-19 pandemic to bolster the Small Business Administration’s Paycheck Protection Program (PPP). It provided loans to small businesses so that they could keep their workers on the payroll. This lending program was terminated on July 30, 2021.
  • The fifth series (the teal area) is the Bank Term Funding Program. This is a recently established temporary program to ensure the liquidity of bank deposits. It is described here and is set to expire on March 11, 2024.
  • The sixth series (the orange area) adds up all the other credit extensions, which include loans that were made available to depository institutions established by the Federal Deposit Insurance Corporation (FDIC). As described by the Board of Governors, the Federal Reserve Banks’ loans to these depository institutions are secured by collateral and the FDIC provides repayment guarantees. See footnote 7 of the H.4.1 BOG data release.

The purpose of those loans is to ensure the ongoing provision of money and credit to the economy and to ensure banks have the ability to meet the needs of all their depositors. The recent increase in their value reflects financial stress stemming from the supervised closing of Silicon Valley Bank (Santa Clara, California) and Signature Bank (New York, New York). The March 13, 2023, joint statement by the US Treasury, Federal Reserve, and FDIC underscores that taxpayers will bear no potential losses from these loans.

How this graph was created: In FRED, search the alphabetical list of releases for “H.4.1 Factors Affecting Reserve Balances” and select “Table 1. Factors Affecting Reserve Balances of Depository Institutions Wednesday Level.” Select the six data series listed under “Loans” and click “Add to Graph.” Use the “Format” tab to change the graph type to “Area” and the stacking option to “Normal.”

Suggested by Diego Mendez-Carbajo.

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