As financial markets reacted to concern that the central bank might start pulling back on its purchases of Treasury bonds and mortgage-backed securities, mortgage rates surged. But comments yesterday helped to put the markets at ease.
Freddie Mac reported in its Primary Mortgage Market Survey for the week ended July 11 that 30-year fixed-rate mortgages averaged 4.51 percent.
Thirty-year rates shot up 22 basis points from the previous week. During the same week last year, the 30 year averaged 3.56 percent.
“June’s strong employment led to more market speculation that the Federal Reserve will reduce future bond purchases causing bond yields to rise and mortgage rates followed,” Freddie Mac Chief Economist Frank Nothaft explained in the report. “The economy gained 195,000 jobs in June, above the market consensus forecast, while revisions to the prior two months added 70,000 on top of that. Moreover, hourly wages rose by 2.2 percent over the last 12 months and represented the largest annual increase in nearly two years.”
But Nothaft said that minutes from the Fed’s monetary policy committee meeting on June 18 and 19 released Wednesday said that many committee members indicated that the pace of the Fed’s bond-buying will not slow until there is further improvement in the outlook for the labor market.
The latest Fed disclosure placed downward pressure on mortgage rates.
Mortgage Daily’s analysis of this week’s Treasury market activity suggests that mortgage rates could be around 7 BPS better in Freddie’s next survey.
During the days that Freddie was surveying primary lenders for this week’s report, the yield on the 10-year Treasury note averaged 2.67 percent, based on data reported by the Department of the Treasury. But the 10-year yield fell to 2.60 percent on Thursday.
A plurality of panelists surveyed by Bankrate.com for the week July 11 to July 17 don’t see any changes ahead during the next week for rates. But a third predicted an increase of at least 3 BPS, while only a quarter forecasted a decline.
Jumbo borrowers were quoted average mortgage rates that were at a 40-basis-point premium to conforming rates in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended July 5. The jumbo-conforming spread worsened from 35 BPS in the prior report.
Freddie reported that the average 15-year fixed-rate mortgage rose to 3.53 from 3.39 percent in the week ended July 3. Fifteen-year mortgages were far more attractive this week with the discount for a shorter-term loan jumping to 98 BPS from 90 BPS in Freddie’s last report.
A 16-basis-point jump from a week earlier left the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaging 3.26 percent in Freddie’s report.
No change from the previous week left the one-year Treasury-indexed ARM averaging 2.66 percent. But Freddie reported that the one-year ARM was 3 BPS below the week ended July 12, 2012.
The Treasury Department reported that the yield on the one-year Treasury note slipped to 0.13 percent today from 0.14 percent a week earlier.
Another ARM index, the six-month London Interbank Offered Rate, was reported by Bankrate.com at 0.41 percent as of Wednesday, no different than a week earlier.
ARMs accounted for 7.9 percent of all activity in the latest Mortgage Market Index report, off from 8.1 percent seven days earlier.
