Fixed mortgage rates have moved lower each week this year. But bond market activity suggests that rates likely won’t be lower in the next report — while longer-term forecasts have a solid increase ahead.
Conforming 30-year fixed rates averaged 4.26 percent on home loans closed during December, Ellie Mae Inc. reported in its Origination Insight Report. That was up from 4.23 percent in November.
On conventional mortgages, Ellie said fixed rates averaged 4.33 percent last month, while they were 4.22 percent on loans insured by the Federal Housing Administration and 4.05 percent on mortgages guaranteed by the Department of Veterans Affairs.
Fixed rates on 30-year loans averaged 3.81 percent in the week ended Jan. 21, according to Freddie Mac’s Primary Mortgage Market Survey.
Long-term mortgage rates tumbled 11 basis points from the prior week. Interest rates have moved lower each week since Dec. 31, when the average was 4.01 percent.
“This drop reflected weak inflation — 0.7 percent CPI inflation for all of 2015 — and nonstop financial market turbulence that is driving investors to the safe haven of Treasuries,” Freddie Mac Chief Economist Sean Becketti explained in the report. “However, the survey was largely complete prior to Wednesday’s Treasury rally that drove the yield on the 10-year Treasury below 2 percent, down 29 basis points since the end of 2015.”
In the same week last year, the 30 year averaged 3.63 percent.
Joe Farr, director at MBSQuoteline, said in a written statement late Thursday that mortgage rates have “improved nicely” since Freddie conducted its most-recent survey.
Fixed rates on residential loans are unlikely to be much different in Freddie’s next survey — possibly up two BPS– based on a Mortgage Daily analysis of Treasury market activity.
But half of the panelists who were surveyed by Bankrate.com for the week Jan. 21 to Jan. 27 expected mortgage rates to fall at least three BPS over the next week. No change was predicted by 30 percent, and a fifth projected an increase.
In its Housing Forecast: January 2016, Fannie Mae predicted that 30-year fixed rates will go from 4.0 percent in the current quarter to 4.1 percent the following two quarters.
The Mortgage Bankers Association predicted in its
Mortgage Finance Forecast that 30-year rates will average 4.0 percent in the first quarter, then rise 20 BPS each quarter for the remainder of the year.
In the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Jan. 15, interest rates on jumbo mortgages were 23 BPS lower than on conforming loans. The spread widened from a negative 17 BPS seven days earlier.
Freddie reported average 15-year fixed rates at
3.10 percent, declining from 3.19 percent in the week ended Jan. 14. The spread between 15- and 30-year rates thinned to 71 BPS from 73 BPS a week earlier.
Fifteen-year loans accounted for 10.8 percent of December’s production, Ellie said. Fifteen-year share was 10.7 percent the previous month.
Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.91 percent in Freddie’s survey, 10 BPS better than a week prior.
Fannie expects hybrid ARMs to average 3.2 percent in the first-half 2016 and 3.3 percent in the third quarter.
One-year Treasury-indexed ARMs averaged 3.10 percent in the week ended Jan. 19, according to HSH.
The one year soared from just 2.68 percent previously reported for one week prior.
Freddie previously reported that one-year ARMs averaged 2.37 percent in the week ended Jan. 22, 2015.
Rates on one-year ARMs are projected by Fannie to be 2.8 percent in the first two quarters of this year then climb to 2.9 percent in the third quarter.
One-year ARMs adjust based on the one-year Treasury yield, which was reported by the Department of the Treasury at 0.44 percent as of Jan. 21, sinking from 0.55 percent one week prior.
A less-utilized ARM index is the London Interbank Offered Rate — or LIBOR — which Bankrate.com reported at 0.86 percent as of Wednesday,
a basis point higher than one week previous.
ARMs made up 10.1 percent of all rate locks tracked in the latest Mortgage Market Index report. ARM share was 13.0 percent in the previous week.
For the month of December, Ellie reported ARM share on closed loans at 5.3 percent, no different than in November.
