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Mortgage Rates Surge, But Could Retreat

Fixed rates on home loans soared to the highest level since October. But some market indicators point to a decline in the next report.

In Freddie Mac’s Primary Mortgage Market Survey for the week ended June 11, thirty-year fixed rates averaged 4.04 percent.

Thirty-year fixed mortgage rates haven’t been this high since the week ended Oct. 9, 2014, when the average came in at 4.12 percent.

The latest 30 year was 17 basis points worse than in the previous survey but 16 BPS better than in the same week last year.

Freddie Mac Deputy Chief Economist Len
Kiefer said mortgage rates followed Treasury yields higher on a solid employment report.

“Markets are responding to strong employment data,” Kiefer said in the report. “In May, the U.S. economy added 280,000 jobs.

“Moreover, job openings surged to 5.4 million in April, up over 20 percent from a year ago.”

Joe Farr, a director at MBSQuoteline, noted that rates have risen since Freddie conducted this week’s survey.

But Treasury market data analyzed by Mortgage Daily indicates that fixed mortgages rates could be in the range of five BPS lower in Freddie’s next survey.

However, most of the panelists surveyed by Bankrate.com for the week June 11 to June 17 predicted that rates will rise by at least three BPS over the next week. A fifth forecasted no change, and none expected a decline.

On jumbo mortgages,
30-year fixed rates averaged 15 BPS more than on conforming loans, according to the U.S. Mortgage Market Index report from Mortgage Daily and Loan Sifter. The jumbo-conforming spread thinned from 18 BPS one week prior.

Fifteen-year fixed rates averaged 3.25 percent in Freddie’s most-recent survey, 17 BPS higher than in the week ended June 4. With 15-year rates moving in tandem with 30-year rates, the spread between short- and long-term fixed rates was unchanged from a week earlier at 79 BPS.

Freddie reported average five-year, Treasury-indexed, hybrid, adjustable-rate mortgages at 3.01 percent, up five BPS from seven days earlier.

Unlike the other mortgage products tracked by Freddie, the one-year Treasury-indexed ARM was down six BPS from the previous report to 2.53 percent. One-year ARMs averaged 2.40 percent in the week ended June 12, 2014.

As of the close of business Thursday, the yield on the one-year Treasury note was 0.28 percent, a basis point less than seven days earlier, according to Treasury Department data.

The six-month London Interbank Offered Rate — or LIBOR — was 0.44 percent as of Wednesday,
rising from 0.42 percent one week prior, according to Bankrate.com.

ARM share was 9.1 percent in the most-recent Mortgage Market Index report.

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