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Rates surged for the seventh consecutive week in response to the Fed’s recent remarks and anticipation of tomorrow’s employment report, which will largely influence whether rates go up or down. Despite the current rising rate environment, mortgage application activity continued upward.
The 30-year fixed-rate mortgage averaged 6.12% this week, representing an increase of 11 basis points (BPS) from last week and the highest level this mortgage rate has been at since September, according to Freddie Mac’s latest survey of 125 lending thrifts. A year ago, the 30-year average stood at 5.62%. Freddie averaged the 15-year at 5.47%, up 12 BPS from last week. Not much change was seen in the 1-year Treasury-indexed adjustable-rate mortgage (ARM), which reportedly rose 1 BPS to an average of 3.76%. On the other hand, the Cost of Funds Index — or COFI, which competes with the 1-year Treasury index for ARM loans — decreased almost 3 BPS from the previous month to 1.815% in March, the Federal Home Loan Bank of San Francisco reported. The ARM share of total loan applications stood at 32.1%, barely changed from the previous week, according to the Mortgage Bankers Association of America (MBA). “A steady drip of good economic news coupled with the Federal Reserve’s change of language in their statement this week reinforced market expectations that the Fed may raise rates sooner than expected” and influenced the rise in mortgage rates, said Freddie economist Amy Cutts in a statement. The Federal Reserve Board’s rate committee said Wednesday it decided to keep the federal funds rate target at 1% and that its monetary policy accommodation “can be removed at a pace that is likely to be measured,” while in its statement in March, the Fed said it could “be patient in removing its policy accommodation.” “In the meantime, employment numbers that will be released tomorrow will either confirm that last month’s figures can be sustained, or it will show that the market got ahead of itself,” Cutts added. “Either way, there is too much volatility at the moment to say precisely where rates will be even as early as next week.” Bankrate.com said the consensus among economists is that employment will show that payrolls rose by 165,000 in April, which if higher can cause mortgage rates to soar and if lower can make them fall. Much of the uncertainty lies in that March’s employment report highly exceeded forecaster’s predictions and that such could also be the case this time around. Those surveyed by Bankrate.com this week indicated mortgage rates will remain steady or drop over the next month and a half; 57% voted that rates will stay about the same (plus or minus 2 BPS), 29% believed rates will drop and 14% predicted an upturn. In late trading Thursday, the 10-year Treasury-Note yield was up 2 BPS from Wednesday at 4.60%, while the price was off $0.16 at 95 9/32. Mortgage loan application activity continued to increase, according to the MBA’s latest Weekly Mortgage Application Survey. This was reflected in the Market Composite Index, which rose by 4.4 percent from the previous week to 780.9. Last year at this time, the index measured 1246.6. Breaking away from a five-week descending trend, refinance activity finally crept up as shown by the Refinance Index increase of 4.7% to 2516.0, MBA said. The refinance share of mortgage activity remained unchanged from the previous week at 44.0% of total applications. The Purchase Index reportedly increased by 4.1% from the previous week to 482.5. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.
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