Interest rates on residential loans were mostly mixed over the past week. But some signs point to a significant move higher over the next week.
Thirty-year fixed rates averaged 3.42 percent during the week that ended on July 14 in the Primary Mortgage Market Survey from Freddie Mac.
Rates were barely changed from the prior week, when the average was 3.41 percent, but were lower than 4.09 percent in the year-prior report.
“We describe the last few weeks as A Tale of Two Rates,” Freddie Mac Chief Economist Sean Becketti explained in the report.”Immediately following the Brexit vote, U.S. Treasury yields plummeted to all-time lows. This week, markets stabilized and the 10-year Treasury yield rebounded sharply.
“In contrast, the 30-year mortgage rate declined after the Brexit vote, but only by half as much as the 10-year Treasury yield.”
Becketti speculates that mortgage rates will remain low throughout the summer.
Joe Farr, a director at MBSQuoteline, wrote in a commentary to Mortgage Daily that prices on mortgage-backed securities have fallen between 20 and 25 basis points since Freddie’s survey was conducted this week. Bond yields move higher when bond prices fall.
“As a result, mortgage rates as of Thursday are actually a little higher than reported,” Farr said.
Mortgage Daily’s analysis of Treasury market activity points to fixed mortgage rates that will be approximately 5 BPS higher in Freddie’s next survey.
A majority of panelists surveyed by Bankrate.com disagreed with Mortgage Daily’s forecast and projected that rates will decline at least 3 BPS over the next week. A third expected no change, and just 11 percent predicted an increase.
But Bankrate.com Chief Financial Analyst Greg McBride was more in line with Mortgage Daily’s outlook.
“Expect a slight rebound in bond yields and mortgage rates with better economic news,” McBride said in a written statement to Mortgage Daily.
Freddie predicted in its
July 2016 Economic & Housing Market Forecast that 30-year fixed rates will average 3.6 percent this quarter and in the fourth quarter then climb to 3.8 percent in the first-three months of next year.
Jumbo rates were 12 BPS higher than conforming rates in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended July 8. The jumbo-conforming spread widened from just a single basis point the prior week.
The average 15-year fixed rate was
2.72 percent in Freddie’s report, 2 BPS less than in the week ended July 7. Fifteen-year rates were 70 BPS lower than 30-year rates, widening from just a 67-basis-point spread in the report from seven days earlier.
Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.76 percent, surging from 2.68 percent one week previous.
Hybrid ARMs are expected to average 2.9 percent in the third-quarter, according to Freddie’s forecast. They’ll then rise to 3.2 percent in the final quarter of this year and 3.4 percent in the first-quarter 2017.
Rates on one-year ARMs were 2.60 percent Thursday, HSH.com reported, down a basis point from seven days ago. Freddie previously reported that one-year ARMs averaged 2.50 percent in the week ended July 16, 2015.
The one-year Treasury note yield determines rate changes on one-year ARMs. As of Thursday, the Department of the Treasury reported the one-year yield at 0.53 percent, 6 BPS more than a week prior.
Some ARMs adjust based on
changes in the six-month London Interbank Offered Rate, which Bankrate.com reported at 0.97 percent as of Wednesday. LIBOR was up from 0.93 percent seven days earlier.
ARM share in the most-recent Mortgage Market Index report was 6.2 percent, widening from 5.7 percent a week previous.
