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Mortgage Rates Dip to 2017 Low, Likely to Soar

Long-term interest rates on mortgages fell to the lowest level in over seven months. But next week’s report is likely to reflect much higher rates.

For the month of May, fixed interest rates on conforming 30-year loans to finance the purchase of single-family residence averaged 3.97 percent.

That turned out to be a nice improvement compared to the preceding month, when conforming long-term rates averaged 4.04 percent.

The rates were based on a small survey conducted by the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac.

In the Primary Mortgage Market Survey from Freddie, 30-year fixed rates averaged 3.88 percent in the week ended June 29. That was the lowest rate since it was 3.57 percent in the week ended Nov. 10, 2016.

The average retreated 2 basis points from a week earlier but was higher than 3.48 percent a year earlier.

Joe Farr, director of sales and marketing at MBSQuoteline, said in a written statement to Mortgage Daily that rates have risen since Freddie conducted this week’s survey as a result of comments from European Central Bank President Mario Draghi suggesting a possible near-term taper of the ECB’s bond buying program.

A Mortgage Daily analysis of Treasury market activity indicates that mortgage rates could be around 8 BPS worse in Freddie’s next survey.

But a majority of panelists surveyed by for the week June 28 to July 4 predicted rates won’t move over the next week. An increase of at least 3 BPS was forecasted by 43 percent, and none expected a decline.

Freddie predicted in its June 2017 Economic & Housing Market Forecast that 30-year fixed rates will average 4.0 percent this quarter, 4.2 percent in the third quarter and 4.3 percent in the final-three months of this year.

Interest rates on jumbo mortgages were 10 BPS higher than conforming rates in the U.S. Mortgage Market Index report from Mortgage Daily and OpenClose. The spread widened from just 3 BPS the previous week.

Freddie’s survey had
15-year fixed rates averaging 3.17 percent, no different than in the week ended June 22. The spread between 15- and 30-year mortgages thinned to 71 BPS from 73 BPS the prior week.

3-basis-point increase from the previous week left five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaging 3.17 percent, Freddie reported.

Freddie expects hybrid ARMs to average 3.1 percent in the second quarter quarter, 3.3 percent three months later and 3.5 percent in the fourth quarter of this year.

The index for hybrid ARMs, the yield on the one-year Treasury note, was 1.23 percent as of Thursday, the Treasury Department reported. The one-year yield inched up from 1.22 percent the previous Thursday.

Another ARM index, the six-month London Interbank Offered Rate, was 1.45 percent as of Wednesday,
up from 1.44 percent seven days prior.

ARM share was 8.9 percent in the most-recent Mortgage Market Index report, thinning from 11.6 percent one week earlier.

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