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| Fixed mortgage rates shot up to their highest level in eight months. But purchase mortgage activity also jumped.
The average 30-year fixed rate was 6.32% in Freddie Mac’s Primary Mortgage Market Survey for the week ending June 12. The 30-year was 23 basis points higher than last week but still lower than 6.74% a year earlier. The 30-year average is at its highest level since Oct. 25, 2007, when it stood at 6.33%. The average 15-year fixed rate soared 28 BPS over the past seven days to 5.93%, Freddie reported. “Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman Bernanke and Vice Chair Kohn, expressed concern over a threat of inflation,” Freddie Chief Economist Frank Nothaft said in the survey. “This led some market participants to believe that the Fed will raise rates more aggressively over the year than previously thought.” If the 10-year Treasury is any indication, fixed rates will continue rising. The 10-year yield reached 4.18% today, up from 4.01% seven days earlier. Bankrate.com reported that 71% of the mortgage bankers, mortgage brokers and “other industry experts” it surveyed for the week June 12 to June 18 predict rates will increase by more than 2 BPS during the next 35 to 45 days. No change is forecast by 8% and 21% expect rates to fall. The 30-year average will not exceed 6.3% until next year, when it reaches 6.4% in the first quarter and climbs to 6.6% by the fourth quarter of 2009, Freddie projected in its latest economic forecast. Adjustable-rate mortgages also increased, with the hybrid 5-year Treasury-indexed hybrid ARM jumping 19 BPS from last week to 5.70%, Freddie’s survey indicated. The 1-year Treasury-indexed ARM averaged 5.09%, up just 0.03% from a week earlier. But the yield on the 1-year Treasury itself was 2.47% Wednesday, jumping 33 BPS over a one-week period. The yield on the 6-month London Interbank Offered Rate, which competes with the 1-year Treasury as an index for ARMs, was 3.17% as of yesterday, Bankrate.com reported. LIBOR yielded 2.90% the prior week. A decline in some ARM indices last week helped push the ARM share of new loan applications to 10% from 9% one week prior, the Mortgage Bankers Association reported in its survey of mortgage bankers, commercial banks and thrifts for the week ending June 6. MBA said a 13% surge in purchase applications and a 17% jump in government 1003s helped push overall applications up 11%, leaving the Market Composite Index at 557.1. Refinance applications were up 8%. The refinance share of new applications was 40%, down from 41% the previous week. |
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Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com. e-mail:Â mtgsam@aol.com |
