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Mortgage Rates Rise, Could Retreat

Fixed rates on home loans rose this past week on comments from the new Federal Reserve chief but could ease back. A popular adjustable-rate product improved.

In Freddie Mac’s Primary Mortgage Market Survey for the week ended March 27, fixed 30-year mortgage rates averaged 4.40 percent.

That was 8 basis points worse than in the prior report, while it was 83 BPS worse than in the same week last year.

“Mortgage rates rose following the uptick on the 10-year Treasury note after comments by the Federal Reserve Board Chair Janet Yellen indicated a possible increase in interest rates as soon as early 2015,” Freddie Mac Chief Economist Frank Nothaft explained in the report. “Also, the S&P/Case-Shiller® 20-city composite house price index rose 13.2 percent over the 12-months ending in January 2014.”

The Federal Housing Finance Agency reported that conforming 30-year fixed rates were 4.45 percent during February, down 22 BPS from January.

By the time Freddie releases its next report, fixed rates could be around 4 BPS lower, according to an analysis of Treasury market activity.

The yield on the 10-year Treasury note averaged 2.73 percent during the period when Freddie surveyed primary lenders this week. The 10-year yield closed at 2.69 percent on Thursday, according to Treasury Department data.

A plurality of panelists surveyed by Bankrate.com for the week March 27 to April 2 predicted mortgage rates won’t move more than 2 BPS over the next week. Another 30 percent forecasted an increase in rates, while the same share forecasted a decline.

Interest rates on jumbo mortgages were 5 BPS more than on conforming mortgages in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended March 21. The jumbo-conforming spread was trimmed from 6 BPS in the last report.

Freddie reported average 15-year fixed rate at 3.42 percent, 10 BPS higher than in the week ended March 20. That cut the spread between 15-year and 30-year rates to 98 BPS from 100 BPS in the previous report.

Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 3.10 in Freddie’s latest report, up 8 BPS from seven days earlier.

At 2.44 percent, one-year Treasury-indexed ARMs averaged 5 BPS less than in the prior week and 18 BPS less than in the week ended March 28, 2013.

One-year ARMs adjust based on the one-year Treasury note yield, which fell to 0.12 percent Thursday from 0.14 percent a week earlier.

A less-utilized ARM index, the six-month London Interbank Offered Rate, was 0.33 percent Wednesday, the same as seven days prior, Bankrate.com reported.

ARM share was 13.7 percent in the latest Mortgage Market Index report, not much different than one week earlier.

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