Interest rates on residential loans improved nicely over the past week. But recent market activity suggests fixed rates could be higher in the next report.
During September, 30-year fixed rates on conforming, conventional mortgages averaged 3.73 percent, the Federal Housing Finance Agency reported.
FHFA, which based its findings on a small survey of home lenders, noted that rates dipped modestly from August, when the average was 3.74 percent.
Thirty-year fixed rates averaged 3.47 percent during the week ended Oct. 27, Freddie Mac reported in its Primary Mortgage Market Survey.
That was down 5 basis points from the prior week’s report. An even more dramatic decline has occurred compared to a year prior, when the average was 3.76 percent.
MBSQuoteline Director Joe Farr reported that prices on mortgage-backed securities, and therefore mortgage rates, have worsened since Freddie conducted its survey.
“Mortgage rates are the highest they have been since before the British vote to exit the European Union in June,” Farr said in a written statement. “The recent rise in rates is tied to reduced expectations for economic stimulus from global central banks.”
A Mortgage Daily analysis of Treasury market activity suggests that fixed mortgage rates might be around 7 BPS higher in Freddie’s next survey.
But 80 percent of Bankrate.com panelists surveyed for the week Oct. 27 to Nov. 2 predict there will be no change in mortgage rates over the next week. The remaining 20 percent were evenly split over whether rates will rise or fall at least 3 BPS.
The Mortgage Bankers Association predicted in its Mortgage Finance Forecast that 30-year fixed rates will average 3.7 percent this quarter then rise 20 BPS each of the following three quarters.
“While inflation is still moderate, it is rising, and with a job market close to full employment we expect the Federal Reserve will raise rates again at the end of 2016.” MBA Chief Economist Michael Fratantoni said in an accompanying statement. “Rate increases through 2017 and 2018 will likely be gradual, as Chair Yellen and the Fed have indicated that they are going to be cautious going forward.”
Fratantoni noted that the trade group expects 30-year mortgage rates to remain under 5 percent until the end of 2018.
Interest rates on jumbo loans were a basis point higher than conforming rates in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Oct. 21. The jumbo-conforming spread was 11 BPS the prior week.
At 2.78 percent in Freddie’s survey, 15-year fixed-rate were a single basis point less than in the week ended Oct. 20. Fifteen-year rates were 69 BPS lower than 30-year rates, more narrow than the 73-basis-point spread last week.
Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.84 percent this week, down a basis point from the previous report.
One-year Treasury-indexed ARMs were 2.85 percent as of Thursday, according to HSH.com, up from 2.82 percent seven days earlier. Freddie previously reported that one-year ARMs averaged 2.54 percent in the week ended Oct. 29, 2015.
The yield on the one-year Treasury note, which is used to determine rate changes on one-year ARMs, was 0.68 percent as of Thursday, according to the Treasury Department, up from 0.66 percent seven days prior.
Another, less-utilized, ARM index, the six-month London Interbank Offered Rate, was reported by Bankrate.com at 1.26 percent as of Wednesday. LIBOR was unchanged from the prior Wednesday.
ARM share was 5.8 percent in the latest Mortgage Market Index report, wider than 5.5 percent in the previous report.
