As long-term fixed rates moved higher, shorter-term rates drifted lower. Some signs point to higher rates in next week’s report, while other indicate no changes are ahead. Industry economists vary on where they expect 30-year rates to move during the next year.
A 5-basis-point rise from a week earlier left the 30-year fixed-rate mortgage averaging 3.37 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Dec. 20. The 30 year has risen 54 BPSÂ from a year earlier.
Mortgage rates aren’t likely to move much by the time Freddie’s next survey is out, according to a Mortgage Daily analysis of Treasury market activity.
Data provided by the Department of the Treasury indicates that the 10-year yield averaged 1.81 percent during the period that Freddie surveyed lenders for this week’s report. The 10-year yield closed at 1.81 percent Thursday.
A survey by Dow Jones Newswires of the Treasury bond market’s 21 primary dealers indicated that the median 2013 prediction for the 10-year yield was 2.25 percent. Forecasts ranged from 1.4 percent to 3.0 percent.
More than two thirds of the panelists surveyed by Bankrate.com for the week Dec. 20 to Dec. 16 predicted that rates will rise at least 3 BPS during the next week. A quarter projected no changes, and just 8 percent foresaw an decrease ahead.
At the Federal National Mortgage Association, economists predict that the 30-year mortgage will average 3.3 percent this quarter and during the first-half 2013.
The Mortgage Bankers Association is a little less optimistic with its view that 30-year rates will rise from 3.7 percent this quarter to 3.9 percent in the first quarter of next year then keep rising each quarter for the rest of the year.
The U.S. Mortgage Market Index report from Optimal Blue and Mortgage Daily for the week ended Dec. 14 indicated that the jumbo-conforming spread was 38 BPS. The previous week, jumbo loans were priced at a 40-basis-point premium over conforming mortgages.
Freddie said that 15-year fixed-rate mortgages averaged 2.65 percent, a basis point lower than the week ended Dec. 13. The spread between 15- and 30-year mortgages jumped to 72 BPS from the prior week’s 66 BPS. Wider spreads make the shorter-term loan more attractive to prospective borrowers.
“Mortgage rates were mixed this week following data reports on stable inflation and a thriving home construction market,” Freddie Mac Chief Economist Frank Nothaft explained in the report. “The 12-month growth in the core consumer price index has remained between 1.9 and 2.1 percent for the past five consecutive months ending in November. Meanwhile, housing starts averaged the strongest three months in November since September 2008, and homebuilder confidence rose in December to its highest reading since April 2008.”
The average five-year, Treasury-indexed, hybrid, adjustable-rate mortgage increased to 2.71 percent in Freddie’s latest survey from the previous week’s 2.70 percent.
But the average one-year ARM fell a basis point from last week to 2.52 percent. In the week ended Dec. 22, 2011, the one year averaged 2.77 percent.
Fannie Mae predicts that the one year will average 2.6 percent in the fourth-quarter 2012 and 2.5 percent during the first nine months of 2013.
One-year ARMs adjust based on changes in the yield on the one-year Treasury note, which increased to 0.15 percent today from 0.14 percent in the previous report.
The six-month London Interbank Offered Rate, which is also used as an ARM index, fell to 0.51 percent Wednesday from 0.52 percent a week prior, according to Bankrate.com.
The latest Mortgage Market Index report had ARM share at 3.6 percent, increasing from the previous week’s 3.0 percent.
Fannie expects ARM share to remain at 4 percent from the current quarter until the second-quarter 2013.
MBA has ARM share at 6 percent in the fourth quarter and in the first three months of next year then spending the next six quarters at 7 percent.
