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Mortgage Rates Surge, Further Increases Ahead

After climbing to the highest level in more than four years, fixed mortgage rates moved even higher. Industry forecasts have long-term mortgage rates ascending another 30 basis points this year.

On conforming conventional loans that were utilized to finance a home purchase, 30-year fixed rates averaged 4.54 percent during March.

That was based on a small survey of primary mortgage lenders by the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac.

Rates climbed 18 basis points compared to February.

During just the seven days ended April 26, thirty-year fixed rates averaged
4.58 percent, according to the Primary Mortgage Market Survey from Freddie. It was the highest level for the 30 year since the week ended Aug. 22, 2013, when the average was 4.58 percent.

“Higher Treasury yields, driven by rising commodity prices, more Treasury issuances and the steady stream of solid economic news, are behind the up tick in rates over the past week,” Freddie’s new chief economist, Sam Khater, said in the report.

In Freddie’s survey from last week, the average 30-year fixed rate was 4.47 percent, while it was 4.03 percent in the same week a year ago.

A majority of panelists surveyed by for the week April 25 to May 1 predicted mortgage rates will rise at least 3 BPS over the next week. A little over a quarter expected a decline, and a fifth projected no change.

Freddie predicted in its April 2018 Economic & Housing Market Forecast that 30-year rates will average 4.5 percent this quarter, 4.6 percent in the third quarter and 4.9 percent in the final-three months of this year.

In the Mortgage Bankers Association’s MBA Mortgage Finance Forecast, the 30 year is expected to go from 4.6 percent in the second quarter to 4.8 percent three months later and 4.9 percent in the fourth quarter.

Jumbo interest rates were 16 BPS higher than conforming rates in the U.S. Mortgage Market Index report from Mortgage Daily and OpenClose for the week ended April 20. The spread doubled from the prior week.

Freddie reported that 15-year fixed rates averaged 4.02 percent, 8 BPS worse than in the week ended April 19.
The spread between 15- and 30-year rates was 56 BPS, widening from 53 BPS last week.

At 3.74 percent, average rates for five-year, Treasury-indexed, hybrid adjustable-rate mortgages was 7 BPS more than in Freddie’s last report.

Freddie expects hybrid ARMs to average 3.9 percent in the second quarter, 4.1 percent three months later and 4.4 percent in the final quarter of this year.

The yield on the one-year Treasury note, which determines rate changes for hybrid ARMs, closed Thursday at 2.25 percent, 4 BPS higher than seven days earlier, according to Treasury Department data.

The six-month London Interbank Offered Rate, which is used as an index on some legacy subprime ARMs, was reported by at 2.52 percent as of Wednesday, rising from 2.50 percent the previous Wednesday.

The Secured Overnight Financing Rate, which will replace LIBOR in 2021, was reported by the Federal Reserve Bank of New York at 1.71 percent as of Wednesday. SOFR was down 3 BPS from a week earlier.

ARM share widened to 15.1 percent in the latest Mortgage Market Index report from the preceding week’s 14.4 percent.

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