Both short-term economic forecasts and long-term forecasts have fixed interest rates on home loans moving in a northerly direction.
For the entire month of April, thirty-year fixed rates on all closed residential loans averaged
4.10 percent, according to Ellie Mae Inc.
Thirty-year rates decreased from a month earlier, when the average was 4.12 percent, Ellie reported in its Origination Insight Report.
But they were up from a year earlier, when the average was 4.06 percent.
Ellie’s data indicated that on conventional loans, 30-year rates averaged
4.17 percent in April 2016, while they were 4.05 percent on mortgages insured by the Federal Housing Administration and 3.88 percent on loans guaranteed by the Department of Veterans Affairs.
More recently, 30-year fixed rates averaged 3.58 percent on all loan types in the week ended May 19, Freddie Mac reported in its Primary Mortgage Market Survey.
That was up a single basis point from the prior week but 26 BPS better than the same week in the prior year.
“Although there was minimal change in rates this week, the hawkish tone of Wednesday’s Fed minutes release had an immediate impact on Treasury yields, and could possibly shake up next week’s survey results,” Freddie Mac Chief Economist Sean Becketti explained in the report.
Since Freddie conducted its survey for this week’s rates, mortgage rates have risen, MBSQuoteline Director Joe Farr said in a written statement.
“The minutes told investors that the Fed is closer to raising the federal funds rate [more] than most expected,” Farr stated. “Therefore, mortgage rates as of Thursday are higher than what the Freddie Mac survey shows.”
A Mortgage Daily analysis of Treasury market activity indicates that fixed mortgage rates are likely to be approximately 6 BPS worse in Freddie’s next report.
Also predicting an increase in mortgage rates over the next week were 70 percent of panelists surveyed by Bankrate.com for the week May 18 to May 24. The remaining 30 percent expected rates not to move more than 2 BPS.
“Not only has the Federal Reserve’s rhetoric about a possible June interest rate hike picked up, but the icing on the cake came with the release of the April meeting minutes,” Bankrate.com Chief Financial Analyst Greg McBride explained in a written statement to Mortgage Daily. “Markets are now re-calibrating for a higher likelihood of a rate hike, pushing mortgage rates up.”
For the entire second quarter, Freddie projected in its
May 2016 Economic & Housing Market Forecast the 30-year rates will average 3.7 percent then rise 20 BPS each quarter for the remainder of the year.
Over at Freddie’s secondary cousin Fannie Mae, 30-year fixed rates are projected to rise from 3.6 percent in the current quarter to 3.7 percent the following two quarters. Fannie made the predictions in its Housing Forecast: May 2016.
The Mortgage Bankers Association is less optimistic about where fixed rates are headed, projecting in its
MBA Mortgage Finance Forecast that the 30 year will move from 3.8 percent in the second quarter to 3.9 percent three months later and 4.1 percent in the fourth quarter.
Interest rates on jumbo mortgages were 6 BPS more than rates on conforming loans in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended May 13. A week earlier, jumbo rates were 3 BPS less than conforming rates.
Fifteen-year fixed rates averaged 2.81 percent in Freddie’s survey, the same as in the week ended May 12. The spread between 15- and 30-year rates widened to 77 BPS from 76 BPS in the previous report.
Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.80 percent this week, Freddie reported, up from 2.78 percent a week prior.
Hybrid ARMs are expected to average 2.9 percent in the current quarter, Freddie predicted, then climb to 3.2 percent in the third quarter and 3.5 percent three months later.
Fannie has hybrid ARMs averaging 2.9 percent in both the second and third quarters and 3.0 percent in the final quarter of this year.
At 2.76 percent as of Thursday, the one-year Treasury-indexed ARM was
20 BPS higher than seven days previous, according to HSH.com. Freddie previously reported that one-year ARMs averaged 2.51 percent in the week ended May 21, 2015.
The index for the one-year ARM, the yield on the one-year Treasury note, closed Thursday at 0.64 percent, according to data from the Department of the Treasury. The one-year yield soared from 0.54 percent the previous Thursday.
A less-utilized ARM index, the six-month London Interbank Offered Rate, was 0.91 percent as of Wednesday, Bankrate.com reported. LIBOR was up from 0.90 percent the previous week.
ARM share was 8.1 percent in the
latest Mortgage Market Index report, wider than 7.9 percent in the week ended May 6.
Ellie’s report indicated that ARM share of funded loans was 4.5 percent last month, thinning from 4.4 percent in March.
