Mortgage Daily

Published On: June 30, 2016

Interest rates on home loans sank on uncertainty created by the British vote to exit the European Union and are likely to remain low in the next report.

During May, fixed interest rates on conventional 30-year mortgages that had loan amounts of $417,000 or less landed at an average of 3.89 percent.

The Federal Housing Finance agency, which reported the data, said conforming rates improved from a month previous, when they averaged 3.94 percent.

More recently, 30-year fixed rates averaged 3.48 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended June 30.

The 30-year was
last this low in the week ended May 9, 2013, when it averaged 3.42 percent, and stands within 17 basis points of its all-time low of 3.31 percent reached in the week ended Nov. 21, 2012.

“In the wake of the Brexit vote, the yield on the 10-year U.S. Treasury bond plummeted 24 basis points,” Freddie Mac Chief Economist Sean Becketti explained in the report. “The 30-year mortgage rate declined as well, but not by as much, falling 8 basis points to 3.48 percent.”

In the week ended June 23, 2016, thirty-year fixed rates averaged 3.56 percent, while the average was 4.08 percent in the week ended July 2, 2015.

MBSQuoteline Director Joe Farr advised Mortgage Daily that prices on mortgage-backed securities have moved “very little in the days following the Freddie Mac rate survey,” indicating little change in mortgage rates from today’s report.

Fixed mortgage rates are likely to move little over the next week, possibly one or two BPS higher, based on a Mortgage Daily analysis of Treasury market activity.

That sentiment was shared by 46 percent of panelists for the week June 30 to July 6. Another 36 percent predicted a decline of at least 3 BPS, while just 18 percent expected an increase.

Rates are likely to inch higher, according to Chief Financial Analyst Greg McBride.

“Markets will continue to rebound from the Brexit sell-off, pushing mortgage rates off the recent lows — but only slightly,” McBride said in a written statement to Mortgage Daily.

In Freddie’s June 2016 Economic & Housing Market Forecast, 30-year fixed rates are expected to go from 2.9 percent in the second quarter to 3.2 percent three months later and 3.5 percent in the fourth quarter.

The National Association of Federal Credit Unions’ NAFCU Economic & CU Monitor: Forecast June 2016 has 30-year rates averaging 3.8 percent for all of this year and 4.2 percent in 2017.

Jumbo mortgage rates were 7 BPS higher than conforming rates in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended June 24. The jumbo-conforming spread widened from 3 BPS a week earlier.

Freddie reported that 15-year fixed rates averaged 2.78 percent in its latest survey, a 5-basis-point improvement over a week earlier.
Fifteen-year rates were 70 BPS lower than 30-year rates. The spread was more narrow than 73 BPS the prior week.

A 4-basis-point decline from Freddie’s last survey left five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaging 2.70 percent.

Freddie’s forecast has hybrid ARMs rising from 2.9 percent in the current quarter to 3.2 percent in the third quarter and 3.5 percent in the final three-month period of this year.

At 2.65 percent as of Thursday, one-year Treasury-indexed ARMs were up 4 BPS from seven days earlier, data indicate. Previously reported data by Freddie indicate that the one-year ARM averaged 2.52 percent in the week ended July 2, 2015.

The yield on the one-year Treasury note, which determines rate changes on one-year ARMs, closed today at 0.45 percent, sinking from 0.58 percent the prior Thursday, Treasury Department data indicate.

The six-month London Interbank Offered Rate was 0.90 percent as of Wednesday,
retreating from 0.93 percent seven days prior, reported.

The 11th District Cost of Funds Index was reported by the Federal Home Loan Bank of San Fransisco at 0.691 percent as of May. COFI
was 0.690 percent a month earlier.

ARM share was
9.1 percent in the latest Mortgage Market Index report.

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