Rates Climb to Highest Level in Years

Rising 13 basis points from a week ago to the highest level since early September 5, 2003, the 30-year fixed-rate mortgage averaged 6.37%, Freddie Mac said its latest survey of 125 mortgage-lending companies, thrifts and commercial banks showed. A year ago, the average was 5.85%.

Freddie’s updated outlook has the 30-year averaging 6.2% this quarter, at the current level next quarter and ending the year at 6.5%.

Accordingly, two-thirds of the 100 mortgage industry bankers, brokers and individuals Bankrate.com surveyed this week believed mortgage rates will rise over the next 35 to 45 days. The rest were evenly split among those who predicted a downturn and those who believed they’d remain relatively unchanged.

The average for the 15-year went up 11 BPS to 6.00%, the secondary lender said.

“Stronger than expected gains in the manufacturing and service industries — coupled with higher labor costs — ignited inflation concerns, which led to the rise in mortgage rates this week,” said Frank Nothaft, Freddie chief economist, in the announcement. “Financial markets are beginning to think that the Fed will hike rates three more times this year, instead of two, putting upward pressure on mortgage rates.”

The 10-year Treasury note yielded 4.73% late today, outweighing the 2-year Treasury note’s yield of 4.72% to reverse the yield curve inversion that had been in effect since late December, according to the Federal Reserve.

The smallest weekly increase — 6 BPS to 6.03% — reportedly occurred in the average for 5-year Treasury-indexed hybrid adjustable-rate mortgages.

Freddie said the average 1-year Treasury-indexed ARM climbed 11 BPS to 5.45% this week — the highest since September 2001. The ARM’s gauge, the 1-year T-bill, moved up 4 BPS within a week to 4.77% Tuesday.

The 1-year ARM is expected to average 5.3% this quarter and end the year at 5.6%, according to Freddie’s March forecast.

The ARM share of activity decreased to below 28%, the Mortgage Bankers Association reported Wednesday.

Application volume was once again almost unchanged from the previous week, but a slight improvement was reported for refinance requests — which accounted for nearly 39% of total applications, according to MBA’s latest Weekly Primary Mortgage Survey.