Fixed mortgage rates crept higher this week and are likely to move higher again in next week’s report. Longer-term forecasts have fixed rate continuing to slowly rise through the end of next year. One adjustable-rate product, however, was lower this week.
A 4-basis-point rise from last week left the average 30-year mortgage at 3.41 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Oct. 25. Thirty-year fixed rates were lower, however, than 4.10 percent a year ago.
Thirty-year rates have the potential to be around 5 BPS higher in Freddie’s next report based on a Mortgage Daily analysis of this week’s Treasury market activity.
The yield on the 10-year Treasury note averaged 1.81 percent during the days that Freddie surveyed its 125 lenders for the current week’s rates, according to data reported by the Department of the Treasury. But the 10-year yield jumped to 1.86 percent today.
A majority of the panelists surveyed by Bankrate.com for the week Oct. 25 to Oct. 31 projected that mortgage rates won’t move more than 2 BPS during the next seven days or so. Just over a quarter forecasted a decline, while a fifth predicted rates will rise.
Freddie predicted in its October 2012 Economic and Housing Market Outlook that the 30 year will average 3.3 percent this quarter, then rise 10 BPS each quarter through the end of next year.
The MBA Mortgage Finance Forecast October 2012 released this week by the Mortgage Bankers Association projects that 30-year rates will climb from 3.8 percent in the fourth quarter to 3.9 percent in the first-quarter 2013 and continue rising to finish next year at 4.4 percent.
In a statement issued Wednesday, the Federal Open Market Committee indicated that employment was slow to grow in September, while unemployment remains elevated and growth in business fixed investment has slowed. In an effort to support sustained improvement in labor market conditions and mitigate the risk from strains in global financial markets, the committee affirmed its policy of continuing to purchase $40 billion in agency mortgage-backed securities each month, will continue through the end of the year to extend the average maturity of its holdings of Treasury securities, and will keep reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS.
“These actions, which together will increase the committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” the FOMC statement said.
Jumbo loan prospects were quoted mortgage rates that were 68 BPS worse than conforming rates in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Oct. 19. That was better than the 71-basis-point spread a week earlier.
Rising 6 BPS from the week ended Oct. 18, the 15-year fixed-rate mortgage averaged 2.72 percent in Freddie’s report. The spread between 15- and 30-year mortgages narrowed to 69 BPS this week from 71 BPS in the previous survey — reducing the benefit of a shorter-term loan.
No change was reported by Freddie for the five-year, Treasury-indexed, adjustable-rate mortgage — which averaged 2.75 percent.
At 1 basis point lower than last week, the one-year Treasury-indexed ARM was 2.59 percent. The one year was 2.90 percent in Freddie’s survey for the week ended Oct. 27, 2011.
The one-year ARM is expected by Freddie to average 2.6 percent this quarter and 2.7 percent during the first-half 2013.
The yield on the one-year Treasury note, which determines adjustments for the one-year ARM, rose to 0.19 percent Thursday from 0.18 percent a week earlier, according to the Treasury Department data.
Another ARM index, the six-month London Interbank Offered Rate, was 0.55 percent as of Wednesday, Bankrate.com reported. LIBORÂ tumbled from 0.59 percent in last week’s report.
Just 2.4 percent of pricing inquiries in the latest Mortgage Market Index report were for ARMs, slightly more narrow than 2.5 percent in the prior report.
Freddie has ARM share of conventional originations at 11 percent in the fourth quarter then rising 1 percentage point each quarter through the end of next year. MBA, meanwhile, predicts ARM share of overall originations will be 6 percent this quarter and in the first-quarter 2013 then spend the rest of next year at 7 percent.
