It was a good week for fixed mortgage rates, though interest rates are poised for an increase by the next report. More borrowers are opting for adjustable-rates — a trend that is likely to continue.
As predicted last week by Mortgage Daily, fixed rates moved lower this week, with Freddie Mac reporting in its Primary Mortgage Market Survey that 30-year rates averaged 4.22 percent this week.
The 30 year was 4.35 percent a week earlier, while the average stood at 3.31 percent in the same week last year.
The reason for the decline, according to Freddie Mac Chief Economist Frank Nothaft, was weaker manufacturing growth and declines in overall inflation rates.
This week’s analysis of Treasury market activity suggests that the 30 year could be around 6 basis points higher in the next report. Data from the Treasury Department indicates that the yield on the 10-year Treasury note, a benchmark for fixed mortgage rates, averaged 2.73 percent during the period that Freddie surveyed lenders for the latest report. The 10-year yield closed at 2.79 percent Thursday.
But a plurality — or half — of panelists surveyed by Bankrate.com for the week Nov. 21 to Nov. 27 predicted mortgage rates won’t move more than 2 BPS over the next week or so. A decline was forecasted by 42 percent, and just 8 percent predicted an increase.
Freddie expects 30-year rates to average 4.2 percent this quarter then rise 20 BPS every three months through the end of next year.
Secondary rival Fannie Mae forecasts a 30-year rate of 4.2 percent this quarter, 4.3 percent in the following quarter and 4.5 percent in the second-quarter 2014.
Jumbo shoppers were quoted rates that were 23 BPS higher than conforming shoppers in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended Nov. 15, improving from the 26-basis-point jumbo-conforming spread the prior week.
Freddie reported average 15-year fixed rates at 3.27 percent, falling from 3.35 percent in Freddie’s previous survey. The difference between 15- and 30-year mortgages was 95 BPS this week, narrowing from a spread of 100 BPS last week and making the 15-year mortgage less attractive.
At 2.95 percent, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgages was down 6 BPS from Freddie’s last report.
Fannie has hybrid ARMs averaging 3.0 percent in the fourth quarter then rising 20 BPS each of the four quarters after that.
No change over the last seven days left one-year Treasury-indexed ARMs averaging 2.61 percent, Freddie said. One-year ARMs were 2.56 percent in the week ended Nov. 21, 2012.
Freddie predicts that one-year ARMs will average 2.7 percent this quarter and in the first-quarter 2014 then rise to 2.8 percent in each of the following two quarters.
At Fannie, one-year ARMs are projected to go from 2.6 percent in the current period to 2.8 percent in the first quarter of next year and 2.9 percent in the following quarter.
The yield on the one-year Treasury note, which is used to determine rate and payment adjustments on one-year ARMs, slipped to 0.12 percent today from 0.13 percent last Thursday, according to Treasury Department data.
A less-used ARM index, the six-month London Interbank Offered Rate, came in at 0.35 percent as of Wednesday, the same as a week earlier, according to Bankrate.com.
ARM share jumped to 11.5 percent in the most recent Mortgage Market Index report from 10.8 percent in the previous report.
Freddie has ARM share at 9 percent this quarter and rising 1 percentage point each quarter through the end of 2014.
ARMÂ share is predicted to be 8 percent in the fourth quarter by Fannie, which sees no change in the first three months of next year but expects a 10 percent ARMÂ share during the following two quarters.
