Long-term fixed rates on residential loans turned sharply higher this past week. But indications are that all of the increase could be reversed in the next rate report.
During April, 30-year fixed rates on conventional mortgages with conforming loan amounts averaged 3.95 percent, the Federal Housing Finance Agency reported.
That was a big improvement over the previous month, when 30-year fixed rates averaged 4.11 percent, according to the regulator of Fannie Mae and Freddie Mac.
More recently, 30-year fixed rates averaged 3.66 percent in Freddie’s Primary Mortgage Market Survey for the week ended April 28.
The 30 year jumped from 3.59 percent a week earlier but eased from 3.68 percent a year earlier.
“The Federal Reserve’s decision to leave the Federal funds rate unchanged triggered a 9-basis-point drop in the 10-year Treasury yield on Wednesday,” Freddie Mac Chief Economist Sean Becketti said in the report. “However the drop occurred too late to impact this week’s survey.”
MBSQuoteline Director Joe Farr said in a written statement that mortgage rates have declined since Freddie conducted this week’s survey.
Mortgage Daily’s analysis of Treasury market data points to a decline of around 7 BPS in fixed mortgage rates in Freddie’s next survey.
Greg McBride, chief financial analyst at Bankrate.com, seemed to agree with Mortgage Daily’s forecast.
“The Fed didn’t raise interest rates and offered no indication that a hike is in the offing, so mortgage rates will reverse much of the run-up over the last week,” he said in a written statement.
Also in agreement were a plurality of panelists surveyed by Bankrate.com for the week April 28 to May 4 who predicted a decline of at least 3 BPS over the next week. The remaining 54 percent were evenly split over whether rates would rise or stay put.
Freddie predicted in its
April 2016 Economic & Housing Market Forecast that 30-year rates will average 3.8 percent this quarter, 4.1 percent in the third quarter and 4.3 percent in the final quarter of this year.
The Mortgage Bankers Association’s MBA Mortgage Finance Forecast has 30-year rates climbing from 3.9 percent in the second quarter to 4.0 percent the following quarter and 4.2 percent in the fourth quarter.
Interest rates on jumbo mortgages were 4 BPS higher than conforming rates in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended April 22. The jumbo-conforming spread widened from 2 BPS in the previous report.
Freddie reported that 15-year fixed rates averaged 2.89 percent, 4 BPS more than in the week ended April 21, 2016.
Fifteen-year rates were 77 BPS lower than 30-year rates. The spread widened from 74 BPS in the last report.
Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.86 percent in Freddie’s latest report, 5 BPS more than seven days prior.
Hybrid ARMs are forecasted by Freddie to average 3.0 percent in the second quarter, 3.4 percent three months later and 3.7 percent in the fourth quarter.
One-year Treasury-indexed ARMs were 2.73 percent as of Thursday, according to HSH.com. One-year ARMs fell from 2.81 percent the previous Thursday.
Freddie previously reported that one-year ARMs averaged
2.49 percent in the week ended April 30, 2015.
The yield on the one-year Treasury note, which determines rate changes on the one-year ARM, closed Thursday at 0.56 percent, the same as a week earlier, according to Treasury Department data.
A less-utilized ARM index, the six-month London Interbank Offered Rate, was 0.91 percent as of Wednesday, Bankrate.com reported. LIBOR was 0.90 percent the prior Wednesday.
ARM share in the latest Mortgage Market Index report was 7.8 percent, thinner than 8.5 percent a week previous.
