As financial markets were in turmoil this past week, fixed mortgage rates sank. But all indications are that rates will bounce back up in the next report.
The Primary Mortgage Market Survey from Freddie Mac for the week ended Aug. 27 indicated that 30-year fixed rates averaged
3.84 percent.
Thirty-year rates sank from the previous week, when the average was 3.93 percent. They were also lower than the same week last year, when the average was 4.10 percent.
Freddie Mac Chief Economist Sean Becketti explained in the report that the stock market was extremely volatile thanks to events in China.
“Interest rates also rocked up and down — although to a lesser extent than equities — as investors alternated between flights to quality and bargain hunting among beaten-down stocks,” Becketti said.
Freddie’s regulator, the Federal Housing Finance Agency, reported that 30-year fixed rates on conforming home loans backed by Freddie and its secondary rival, Fannie Mae, averaged 4.20 percent in July, up 16 BPS from June.
MBSQuoteline Director Joe Farr said in a written statement that Freddie’s latest survey was conducted at the height of the sell off in the stock market.
“Unfortunately, since then mortgage rates have reversed some of the improvement and as of Thursday are a little higher than what the survey indicates,” Farr said.
Mortgage Daily’s analysis of Treasury market activity indicates that fixed mortgage rates could be roughly eight BPS worse in Freddie’s next survey — though looming volatility could render that prediction null and void.
A plurality of panelists surveyed by Bankrate.com for the week Aug. 27 to Sept. 2 agreed with Mortgage Daily’s forecast and predicted rates will rise. A decline was projected by 36 percent, while just 18 percent expected rates not to move more than two BPS over the next week.
“There are indications though that the unsettled state of global markets will make the Fed think twice before taking any action on short-term interest rates in September,” Freddie’s Becketti said. “If that’s the case, the 30-year mortgage rate may remain subdued in the short-to-medium term, providing support for continued strength in the housing sector.”
In Fannie’s Housing Forecast: August 2015, 30-year fixed rates are projected to average 4.0 percent this quarter and in the fourth quarter then rise to 4.1 percent in the first-quarter 2016.
Interest rates on jumbo mortgages were 25 BPS less than on conforming loans in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Aug. 21, widening from a negative 19-basis-point spread a week earlier.
Fifteen-year fixed rates averaged 3.06 percent in Freddie’s survey, nine basis points more than in the week ended Aug. 20. The spread between 15- and 30-year rates was 78 BPS, the same as in the last report.
Freddie said the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 2.90 percent, four BPS better than seven days earlier.
Five-year ARMs are
forecasted by Fannie to average 2.9 percent in the third quarter, 3.0 percent three months later and 3.1 percent during the first three months of next year.
At 2.62 percent, Treasury-indexed one-year ARMs were unchanged
from Freddie’s previous survey. In the week ended Aug. 28, 2014, the one year averaged 2.39 percent.
One-year ARMs are predicted by Fannie to average 2.5 percent in the current quarter, 2.6 percent in fourth quarter and 2.7 percent in the first-quarter 2016.
Treasury Department data indicate that the yield on the one-year Treasury note, which is utilized as an index for the one-year ARM, closed at 0.36 percent
Thursday, three BPS better than seven days prior.
The six-month London Interbank Offered Rate
was 0.52 percent as of Wednesday, slipping from 0.53 percent one week previous, according to data from the Department of the Treasury.
ARM share in the latest Mortgage Market Index report was 11.6 percent, fattening from 8.5 percent in the prior report.
