Interest rates on home loans took a turn for the worse this week, and next week could see a replay. Fifteen-year rates became slightly more attractive.
Thirty-year fixed rates averaged 3.76 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Feb. 19.
The 30 year worsened from the prior report, when it averaged 3.69 percent. But the average has fallen 57 basis points compared to the same week last year.
For the entire month of January, thirty-year fixed rates on closed loans averaged 4.154 percent, falling from 4.251 percent in December, according to Ellie Mae Inc.’s Origination Insight Report.
On just conventional mortgages, Ellie said 30-year rates averaged 4.253 percent in January, while they were just 4.066 percent on loans insured by the Federal Housing Administration. Mortgages guaranteed by the Department of Veterans Affairs had the lowest 30-year rate: 3.852 percent.
Fixed rates could be approximately 3 BPS higher in next week’s report from Freddie based on Mortgage Daily’s analysis of weekly Treasury market activity.
Joe Farr,
director of sales and marketing at MBSQuoteline, suspects mortgage rates might be higher in the next survey.
“Based on the Freddie Mac 30-year rate rising only 7 BPS, I expect most people replied to the survey using their Tuesday morning rate sheets,” Farr explained. “Some of the further drop in MBS prices on Tuesday after morning rate sheets were issued was offset by Wednesday’s rally following the Fed statement, but not all, and today MBS prices are lower, rates are higher.”
A plurality of panelists surveyed by Bankrate.com for the week Feb. 19 to Feb. 25 concurred that rates will rise over the next week. Less than a third expected no change, while fewer than a quarter predicted rates will retreat at least 3 BPS.
In the longer term, Freddie projected in its latest economic forecast that 30-year fixed rates will average 3.7 percent in the current quarter, 3.8 percent in the second quarter and 4.0 percent during the following three-month period.
Interest rates on jumbo mortgages were 21 BPS higher than on conforming loans in the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Feb. 13. The jumbo-conforming spread worsened from 17 BPS one week prior.
A six-basis-point increase from the week ended Feb. 12 left 15-year fixed rates averaging 3.05 percent in Freddie’s report. The spread between 15- and 30-year mortgage rates widened to
71 BPS from 70 BPS seven days prior.
Ellie reported that 15-year mortgages accounted for 10.8 percent of January production, increasing from a 9.9 percent share in December.
At 2.97 percent, Treasury-indexed, hybrid, adjustable-rate mortgages were no different than in Freddie’s previous survey. Freddie sees hybrid ARMs averaging 2.8 percent in the first quarter and 2.9 percent in the second quarter.
Freddie reported average one-year ARMs at 2.45 percent, 3 BPS worse than a week earlier but 12 BPS better than in the week ended Feb. 20, 2014.
In Freddie’s outlook, the one-year ARM is expected to fall from 2.5
percent in the first three months of 2015 to 2.4 percent then bounce back up to 2.5 percent in the third quarter.
The yield on the one-year Treasury note, which determines rate and payment changes on one-year ARMs, closed Thursday at 0.23 percent, the same as a week earlier, according to data from the Department of the Treasury.
A different ARM index, the six-month London Interbank Offered Rate, was 0.38 percent Wednesday, also the same as the previous week, Bankrate.com reported.
ARMs accounted for 5.1 percent of all originations during January, according to Ellie, falling from 5.8 percent the previous month.
In the most-recent Mortgage Market Index report, ARM share was 8.6 percent, off slightly from 8.7 percent in the previous report.
Freddie anticipates that ARM share will be 10 percent in the first half of this year and 11 percent in the second half.
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