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Mortgage Rates Hold But Face Volatility

Fixed rates on home loans inched higher this week but stand less than a quarter percentage point above the year-earlier level. Volatility is on the agenda for the next week.

In its Primary Mortgage Market Survey for the week ended Thursday, Freddie Mac reported average 30-year fixed rates at 4.14 percent.

That was 2 basis points more than the average last week and 23 BPS higher than in Freddie’s survey for the same week last year.

This week’s Treasury market activity points to no significant changes in Freddie’s next report, with the 10-year Treasury yield closing at 2.59 percent Thursday versus the 2.58 percent average for the days Freddie surveyed lenders this week, according to Treasury Department data.

A plurality of panelists for the week June 5 to June 11 agreed with Mortgage Daily’s forecast and predicted that rates won’t move more than 2 BPS over the next week or so, while the remaining 54 percent were evenly split over whether rates would increase or decline.

But mortgage rates are likely to be volatile given tomorrow’s employment report from the Department of Labor. Last month, a low labor force participation rate drove mortgage rates lower.

Jumbo mortgages were priced 8 BPS better than conforming loans in the U.S. Mortgage Market Index report from LoanSifter-Optimal Blue and Mortgage Daily for the week ended May 30 The jumbo-conforming spread narrowed from a negative 10 BPS a week earlier.

Freddie reported average 15-year fixed rates at 3.23 percent, 2 BPS more than in the week ended May 29. The spread between 15- and 30-year mortgages was unchanged at 91 BPS.

A 3-basis-point decline was recorded for five-year, Treasury-indexed, hybrid, adjustable-rate mortgages, which Freddie reported at 2.93 percent.

At 2.40 percent, one-year Treasury-indexed ARMs were a basis point less than in the previous report. Freddie said that one-year ARMs averaged 2.58 percent in the week ended June 6, 2013.

One-year ARMs adjust based on the one-year Treasury yield, which closed Thursday at 0.10 percent, the same as seven days earlier, according to the Treasury Department.

Another ARM index, the six-month London Interbank Offered Rate, was 0.32 as of Wednesday, the same as a week earlier, reported.

In the latest Mortgage Market Index report, ARMs accounted for 12.2 percent of all activity. ARM share was 12.8 percent in the previous report.

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