Interest rates on residential loans moved higher this week and could continue the upward trend into the next report.
At 3.59 percent for the week ended March 23, the 30-year, fixed-rate mortgage averaged 8 basis point more in Freddie Mac’s Primary Mortgage Market Survey than it did a week earlier. It was the third week in a row that rates rose. Compared to a year earlier, however, the 30 year has retreated 19 BPS.
A look at this week’s Treasury market activity suggests that mortgage rates could be even higher in next week’s report.
During the days that Freddie surveyed primary lenders for this week’s report, the yield on the 10-year Treasury note — a benchmark for fixed mortgage rates — averaged 1.98 percent, according to data reported by the Department of the Treasury. After wild intraday swings, the yield on the 10-year Treasury note closed Thursday at 2.02 percent.
Rates aren’t expected to move more than 2 BPS over the next week, according to a plurality of panelists surveyed by Bankrate.com for the week May 23 to May 29. Less than a third predicted a decline, and under a quarter saw rates rising.
On a longer-term basis, Fannie Mae has the 30 year averaging 3.4 percent this quarter, 3.6 percent in the third quarter and 3.7 percent in the final three months of 2013.
The Mortgage Bankers Association was a little more aggressive than Fannie in its latest outlook, predicting that the 30 year will climb from 3.7 percent in the second quarter to 3.9 percent three months later and 4.0 percent in the fourth quarter.
Jumbo borrowers were quoted an average rate that was 26 BPS higher than conforming rates in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended May 17. The jumbo-conforming spread was cut from 31 BPS seven days earlier.
Freddie reported the average 15-year mortgage this week at 2.77 percent, surging 8 BPS from the prior survey. This week’s movement left 15-year loans priced 82 BPS lower than 30-year loans, the same spread as last week.
A one-basis-point rise from the week ended May 16 left the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage at 2.63 percent in Freddie’s survey.
Fannie projects that the five-year ARM will average 2.6 percent in the second quarter then rise 20 BPS during each of the remaining two quarters this year.
One-year, Treasury-indexed ARMs averaged the same as last week: 2.55 percent. Freddie previously reported the one year at 2.75 percent for the week ended May 24, 2012.
Fannie put the average one-year ARM at 2.6 percent this quarter and 10 BPS higher each of the subsequent five quarters.
The yield on the one-year Treasury note, which is used as an index to determine rate adjustments on one-year ARMs, closed at 0.12 percent today, the same as last Thursday, the Treasury Department reported.
The six-month London Interbank Offered Rate, which also acts as an ARM index, was 0.42 percent as of Wednesday, the same as reported for a week earlier by Bankrate.com.
ARM share came in at 4.7 percent in the latest Mortgage Market Index report, up from the previous week’s 4.2 percent.
Fannie has ARM share at 5 percent this quarter and at 6 percent in the remaining half of the year.
