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Mortgage Rates Dip, Could Fall Further

A modest week-over-week drop was reported for fixed rates on residential loans, and an even bigger decline is likely in the next report.

Thirty-year note rates on single-family loans averaged
4.25 percent during July. Mortgage rates dipped 2 basis points from the preceding month.

But last month’s mortgage rates were nowhere near as good as they were in the same month last year, when the average 30-year note rate was 3.87 percent.

Ellie Mae Inc. reported those findings in its July 2017 Origination Insight Report.

Interest rates on conventional loans were 4.31 percent in July
2017, while rates on mortgages insured by the Federal Housing Administration were 4.25 percent, and rates on loans guaranteed by by the Department of Veterans Affairs averaged 4.00 percent.

During just the seven days ended Aug. 17, thirty-year fixed rates averaged 3.89 percent in Freddie Mac’s Primary Mortgage Market Survey. The average dipped from 3.90 percent a week earlier but sat well above 3.43 percent a year earlier.

“Mortgage rates are continuing to hold at low levels amidst ongoing economic uncertainty,” Freddie Mac Chief Economist Sean Becketti said in the report.

MBSQuoteline Director of Sales and Marketing Joe Farr
explained in a written statement that interest rates appear to have worsened since Freddie conducted its survey. Rates were driven higher by a strong retail sales report.

But an analysis of Treasury market activity by Mortgage Daily indicates that mortgage rates could be around 5 BPS lower in Freddie’s next survey.

However, half of the panelists surveyed by for the week Aug. 16 to Aug. 22 predicted that mortgage rates won’t move more than 2 BPS over the next week. An increase was projected by 40 percent, and only 10 percent expected a decline.

Looking further out, Fannie Mae predicted in its Housing Forecast: August 2017 that long-term rates will rise from 3.9 percent in the third quarter to 4.0 percent each of the following two quarters and 4.1 percent the next three quarters.

Interest rates on jumbo mortgages were 8 BPS more than conforming rates in the U.S. Mortgage Market Index report from Mortgage Daily and Open Close for the week ended Aug. 11. The jumbo-conforming spread widened from 5 BPS the previous week.

Fifteen-year fixed rates averaged 3.16 percent in Freddie’s survey, a 2-basis-point improvement from the week ended Aug. 10. Meanwhile, the spread between 15- and 30-year rates widened to 73 BPS from 72 BPS one week prior.

At 3.16 percent in Freddie’s most-recent survey, five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2 BPS more than in the last report.

Fannie predicts that hybrid ARMs will average 2.9 percent in the third and fourth quarters of this year and 3.0 percent in the first-quarter 2018.

Hybrid ARMs adjust based on the one-year Treasury note yield, which the Treasury Department reported closed at 1.24 percent Thursday, up 2 BPS from the previous Thursday.

A less-utilized ARM index, the six-month London Interbank Offered Rate, was 1.45 percent as of Wednesday,
the same as seven days sooner, reported.

Ellie reported that ARM share was trimmed to 5.7 last month from 5.9 percent in June but was still wider than 4.5 percent in July 2016.

ARM share in the most-recent Mortgage Market Index report was 13.3 percent, fattening considerably from 9.0 percent the prior week.

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