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Mortgage Rates Little Changed, More of Same Ahead

Over the past week, there was little change in interest rates on home loans. During the next week, more of the same is likely. Recently rising rates have helped the Federal Home Loan Banks’ earnings.

Conventional mortgages with conforming loan amounts used to finance the purchase of a single-family property had an average 30-year fixed rate of 4.77 percent in July.

The monthly average was up just a single basis point versus the preceding month.
But long-term mortgage rates have significantly increased versus July 2017, when they averaged 4.14 percent.

Reporting the rate was the Federal Housing Finance Agency, which derived its findings from a small survey of primary lenders.

As interest rates have been on the rise this year, the FHLBs have seen earnings improve by
$173 million during the first half of this year, according to Moody’s Investors Service. The net interest margin at the FHLBs rose 9 BPS to 0.47 percent.

Freddie Mac, which is regulated by FHFA, reported in its Primary Mortgage Market Survey for the week ended Aug. 30 that 30-year fixed rates averaged 4.52 percent. There wasn’t much change from 4.51 percent a week ago, but the 30 year has soared 70 BPS from a year earlier.

Mortgage Daily’s analysis of Treasury market data suggests that fixed rates could be approximately the same in next week’s survey from Freddie.

Less than half of panelists surveyed by for the week Aug. 29 to Sept. 4 agreed with Mortgage Daily and predicted no change in mortgage rates over the next week. Forty percent foresaw an increase of at least 3 BPS, and 13 percent predicted a decline.

Freddie predicted in its August 2018 Economic & Housing Market Forecast that 30-year rates will average 4.6 percent this quarter and 4.8 percent in the fourth quarter.

Jumbo interest rates were
12 BPS higher than conforming rates in the U.S. Mortgage Market Index report for the week ended Aug. 24 from Mortgage Daily and OpenClose. The spread widened from 10 BPS a week prior.

At 3.97 percent, 15-year fixed rates in Freddie’s survey were a basis point lower than in the week ended Aug. 23. Fifteen-year rates were 55 BPS higher than 30-year rates, widening from 53 BPS a week ago.

Freddie reported that five-year, Treasury-indexed, hybrid adjustable-rate mortgages averaged 3.85 percent, 3 BPS higher than in the previous survey.

Hybrid ARMs are forecasted by Freddie to average 3.9 percent in the third quarter and 4.1 percent the following three months.

Interest rates on hybrid ARMs adjust based on the one-year Treasury note yield, which was closed Thursday at 2.47 percent, jumping 4 BPS from the prior Thursday, according to Treasury Department data.

The six-month London Interbank Offered Rate, which acts as an index for some legacy ARMs, was reported by at 2.53 percent as of Wednesday, up 2 BPS from the preceding Wednesday.

Secured Overnight Financing Rate, which is set to replace LIBOR, was 1.93 percent as of yesterday, rising 3 BPS from seven days earlier, according to the Federal Reserve Bank of New York.

ARM share was 17.6 percent in the most-recent Mortgage Market Index report, thinner than a fifth a week previous.

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