There was no relief this week in the mortgage market. Rates rose, activity eased and at least one panel predicts a further increase in mortgage rates.
Rising 22 basis points from last week, the average 30-year fixed-rate mortgage was 4.83 percent in Freddie Mac’s weekly survey of 125 thrifts, credit unions, commercial banks and mortgage lending companies for the week ended Thursday. The 30-year was 4.94 percent during the same week last year.
Frank Nothaft, Freddie’s chief economist, explained in the report that market concerns over stronger economic growth sparked fears of inflation and pushed bond yields higher.
A slow rate of economic recovery and persistently high unemployment prompted the Federal Reserve’s Federal Open Market Committee in November to keep up its efforts to stimulate the economy. The fed funds rate target is already at 0.00 percent to 0.25 percent.
“To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the committee decided today to continue expanding its holdings of securities as announced in November,” a statement Tuesday said. “The committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.”
The benchmark 10-year Treasury yield climbed to 3.47 percent today from 3.23 percent a week earlier, according to Treasury Department data. Given the similar movement in the 30-year mortgage rate, rates should end up where they are now by next Thursday — though recent market volatility makes that an unlikely scenario.
There was no doubt among the panelists surveyed by Bankrate.com for the week Dec. 16 to Dec. 22 about where mortgage rates are headed. Nearly three-quarters projected an increase of at least 3 BPS during the next week, while 20 percent saw no changes ahead and 7 percent predicted a decline.
The jumbo-conforming spread fell to 73 BPS in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Wednesday from last week’s 75 BPS.
Moving 21 BPS higher than a week ago, the fixed-rate 15-year mortgage was 4.17 percent in Freddie’s report.
Freddie said that the five-year Treasury-indexed hybrid adjustable-rate mortgage was 3.77 percent, worse than 3.60 percent last week.
The smallest weekly increase — 8 BPS — was credited to the one-year Treasury-indexed ARM, which Freddie reported at 3.35 percent. The one-year averaged 4.34 percent at this time during 2009. The underlying one-year Treasury yield was up just 1 basis point this week to 0.31 percent, the Treasury reported.
The six-month LIBOR, used as the index on many subprime ARMs, was 0.46 percent Wednesday, the same as a week earlier.
ARM share inched down to 5.5 percent from the prior week’s 5.6 percent in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Dec. 10.
The Mortgage Market Index fell to 221 from the previous week’s 260 but was higher than 197 a year earlier. The weekly decline in business was the result of weakening refinances, with the refinance share falling to 52 percent from 56 percent a week earlier. The rate-term share was 37 percent this week, and the cashout share was 16 percent.
The average U.S. mortgage amount in the Mortgage Market Index report was $204,437, falling from $209,625 seven days earlier. The highest average was Washington, D.C.’s, $280,756, and South Dakota’s $133,406 was the lowest.
