A strong employment report for May pushed fixed mortgage rates higher for the sixth consecutive week. Adjustable-rate products, however, were less impacted by the positive economic news.
At 3.98 percent, the 30-year, fixed-rate mortgage averaged 7 basis points more in Freddie Mac’s Primary Mortgage Market Survey for the week ended June 13 than it did a week earlier.
The 30 year has increased each week since May 2, when it averaged 3.35 percent. During this week last year, the 30 year was lower at 3.71 percent.
“Fixed mortgage rates crept up further this week following a solid employment report for May,” Freddie Mac Chief Economist Frank Nothaft explained. “The economy added 175,000 new jobs and the number of discouraged workers fell by 780,000 to the fewest since September 2009. And although the unemployment rate ticked up to 7.6 percent, it was due to a 420,000 increase in the size of the labor force; the underemployment rate fell from 13.9 to 13.8 percent in May.”
Mortgage rates are poised to stay where they are or even ease a little by the next report, according to an analysis of this week’s Treasury market activity.
The 10-year Treasury note yield averaged 2.22 percent during the period that Freddie was conducting this week’s survey, according to Treasury Department data. The 10-year yield closed at 2.19 percent Thursday, suggesting a possible 3-basis-point decline.
Nearly two-thirds of panelists surveyed by Bankrate.com for the week June 13 to June 19 predicted that mortgage rates won’t move more than 2 BPS over the following week. More than a quarter forecasted a decline, and just 9 percent expected an increase.
Fannie Mae predicts that the 30-year mortgage will average 3.6 percent in the second quarter, 3.9 percent in the third quarter and 4.2 percent in the final three months of 2013.
The spread between jumbo and conforming mortgages was unchanged from a week earlier at 30 BPS in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended June 7.
A 7-basis-point rise from the week ended June 6 left the 15-year, fixed-rate mortgage averaging 3.10 percent in Freddie’s survey. Like 30-year mortgages, the 15-year mortgage has increased each week since May 2, when the average was 2.56 percent.
Borrowers who opted for a shorter term loan had an interest rate that was discounted 88 BPS from 30-year mortgages. Last week, the spread between 15- and 30-year loans was also 88 BPS.
Up 5 BPS over the past seven days, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 2.79 percent, according to Freddie’s report.
Fannie sees the five-year hybrid ARM averaging 2.6 percent this quarter and 2.9 percent in the third quarter. By the fourth quarter, the average is expected to rise to 3.2 percent.
No change from last week was recorded for the one-year Treasury-indexed ARM, which averaged 2.58 percent in Freddie’s survey. But the one year was 20 BPS lower than the week ended June 14, 2012.
Fannie forecasted that the one-year ARM will average 2.6 percent in the second quarter, 2.7 percent in the third quarter and 3.0 percent in the fourth quarter.
There was no change over the past week for the one-year Treasury note, which yielded 0.14 percent Thursday based on Treasury data.
Another ARM index that was unchanged from a week earlier was the six-month London Interbank Offered Rate, which Bankrate.com reported at 0.41 percent as of Wednesday.
ARM share inched up to 5.7 percent in the latest Mortgage Market Index report from the prior week’s 5.1 percent share.
Based solely on conventional loan applications, Fannie expects 6 percent of second- and third-quarter activity to be ARMs, while the share is expected to rise to 7 percent in the final quarter of this year.
