While rates on 15-year mortgages and hybrid adjustable-rate mortgages were lower this week, long-term fixed rates didn’t move. Mortgage rates were shaken up today by a Federal Reserve policy announcement.
There was no change from last week in the 30-year fixed-rate mortgage, which averaged 3.55 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Sept. 13. But the 30 year was down from 4.09 percent during the same week last year.
Freddie Mac Chief Economist Frank Nothaft explained in the survey, “Despite a lackluster August employment report, Treasury bond yields and mortgage rates were little changed this week with the financial markets speculating on further monetary stimulus from the Federal Reserve.”
The speculation came to an end on Thursday, with the Federal Reserve Board and the Federal Open Market Committee announcing plans to extend quantitative easing by $40 billion a month by buying more agency mortgage-backed securities. Including bond-buying programs already in place, Fed holdings of longer-term securities will increase by around $85 billion each month through the end of this year.
And the market reacted.
The Dow Jones Industrial Average climbed more than 200 points Thursday to close at 13,539, while the yield on the 10-year Treasury note was down 2 BPS.
Given that Thursday’s closing 10-year yield was around 3 BPS higher than the average 10-year yield during the period that Freddie surveyed its lenders for this week’s survey, mortgage rates are positioned to inch up around 3 BPS by the next survey.
But a plurality of panelists surveyed by Bankrate.com for the week Sept. 13 to Sept. 19 predicted mortgage rates won’t move more than 2 BPS over the next week or so. Another 36 percent forecasted an increase, and just 21 percent projected a decline.
Freddie expects the 30-year mortgage to average 3.6 percent this quarter then rise 10 BPS each quarter through the end of next year.
The premium for a jumbo mortgage fell to 66 BPS in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Sept. 7 from 71 BPS in the prior report.
A one-basis-point week-over-week decline was recorded for the 15-year mortgage, which Freddie reported at 2.85 percent. Fifteen-year mortgages were priced 70 BPSÂ better than 30-year loans, a little bigger discount than 69 BPS in the week ended Sept. 6.
At 2.72 percent, the average five-year, Treasury-indexed, hybrid ARM was down 3 BPS from Freddie’s prior report.
The one-year Treasury-indexed ARM averaged 2.61 percent, unchanged from a week earlier but 20 BPS lower than in Freddie’s survey for the week ended Sept. 15, 2011.
Freddie’s outlook has the one-year ARM averaging 2.8 percent in the second-half 2012 and 2.9 percent in the first-half 2013.
The underlying index for the one-year ARM, the yield on the one-year Treasury note, closed at 0.17 percent today, off from 0.18 percent last Thursday, according to Treasury Department data.
Another ARMÂ index, the six-month London Interbank Offered Rate, was also down 1 basis point for the week to 0.69 percent, Bankrate.com reported.
ARMÂ share of new loan inquiries was 2.8 percent in the latest Mortgage Market Index report, not much different than in the previous report.
Freddie predicts that ARM share of loan production will be 10 percent this quarter and increase 1 percent each quarter through the final quarter of 2013.
