Interest rates on home loans plunged this past week. But the decline is likely to be erased in the next report.
Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Dec. 18 that 30-year fixed rates averaged 3.80 percent.
That was 13 basis points better than a week earlier, 67 BPS below a year earlier and the lowest level for the 30 year so far in 2014.
“November housing starts came in at a seasonally adjusted annual rate of 1.028 million starts, down 1.6 percent from an upwardly-revised October value,” Freddie Mac Chief Economist Frank Nothaft said in the report. “Housing starts for the calendar year will likely come in around 1.0 million, above the 2013 pace but lower than forecasters had expected at the start of 2014. Consumer prices declined more than expected in November, with CPI contracting 0.3 percent.”
Ellie Mae reported in its Origination Insight Report that 30-year rates averaged 4.273 percent in November, lower than the prior month’s 4.371 percent.
Mortgage Daily expects fixed rates to surge around 11 BPS in Freddie’s next survey based on an analysis of Treasury market activity.
But that’s not how most of the panelists
surveyed by Bankrate.com for the week Dec. 18 to Dec. 24 see it. Forty-two percent predicted rates will fall at least 3 BPS, another 42 percent see no changes ahead and just 16 percent forecasted an increase.
Freddie predicts that 30-year rates will end the fourth quarter averaging 4.0 percent, increase to 4.1 percent in the first-quarter 2015 and continue climbing 20 BPS every three months after that through the end of 2016.
Rival Fannie Mae said in its
Housing Forecast: December 2014 that first-quarter 2015 thirty-year rates won’t change from 4.0 percent in the current quarter but will rise each quarter after that to end 2015 at 4.3 percent.
At the Mortgage Bankers Association, 30-year rates are forecasted to average 4.0 percent in the final quarter of this year then rise every three months after that and reach 5.8 percent by the fourth-quarter 2016.
Jumbo mortgage rates were 8 BPS higher than conforming rates in the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Dec. 12. The jumbo-conforming spread widened from 6 BPS in the previous report.
Fifteen-year fixed rates averaged 3.09 percent in Freddie’s survey, improving 11 BPS from the week ended Dec. 11. The spread between 15- and 30-year rates fell to 71 BPS from 73 BPS seven days prior.
Ellie reported that 15-year mortgages accounted for 10.3 percent of all originations in November, increasing from the previous month’s 9.6 percent share.
At 2.95 percent, five-year, Treasury-indexed, hybrid adjustable-rate mortgages averaged 3 BPS less than in Freddie’s last survey.
Freddie predicts that hybrid ARMs will average 3.0 percent in the fourth quarter of this year then rise each quarter through the end of 2016 — when it is expected to reach 5.0 percent.
Fannie expects hybrid ARMs to average 3.0 percent in the current and following quarter then rise each three-month period after that to end 2015 at 3.4 percent.
A 2-basis-point drop from a week earlier left one-year Treasury-indexed ARMs averaging 2.38 percent in Freddie’s latest survey. One-year ARMs averaged 2.56 percent in the week ended Dec. 19, 2013.
One-year ARMs are expected by Freddie to average 2.5 percent in the final three-month period of this year and the first three-month period of next year. The one year will rise each quarter after that and reach 3.4 percent by the fourth-quarter 2016.
Fannie expects one-year ARMs to average 2.4 percent in the fourth-quarter 2014 then increase 10 BPS each quarter through the end of next year.
One-year ARMs adjust according to the yield on the one-year Treasury note, which leapt to 0.25 percent Thursday from 0.21 percent seven days earlier, according to Treasury Department data.
A lesser-utilized ARM index, the London Interbank Offered Rate — or LIBOR — was 0.34 percent as of Wednesday, unchanged from the prior week, Bankrate.com reported.
ARM share was 6.1 percent in November, according to Ellie, off from the prior month’s 6.3 percent share.
In the latest Mortgage Market Index report, ARM share was 11.1 percent, about the same as seven days earlier.
Freddie predicts that ARM share will be 11 percent in the fourth-quarter of this year then widen 1 basis point each quarter through then end of 2016.
Fannie has ARM share bouncing between 8 percent and 10 percent from now through the end of next year.
