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Mortgage Rates Barely Slip, More of Same Likely

Mortgage rates were minimally lower this week, and the outlook is for little change over the next week — though a key economic report could change that.

Long-term fixed rates on residential loans averaged 3.85 percent in the week ended Oct. 1, according to Freddie Mac’s Primary Mortgage Market Survey.

The 30-year average slipped just a basis point compared to the prior survey and was down a more robust 34 BPS versus the same week a year ago.

Freddie Mac Chief Economist Sean Becketti noted in the report that 30-year fixed rates have been under four percent for 10 consecutive weeks.

Since Freddie conducted its survey of primary lenders, mortgage rates have have improved, MBS Quoteline Director Joe Farr said in a written statement.

Fixed mortgage rates are unlikely to be much different in Freddie’s next report, though they could slip two BPS, according to Mortgage Daily’s analysis of Treasury market activity.

A majority of panelists surveyed by for the week Oct. 1 through Oct. 7 agreed with the Mortgage Daily forecast and predicted mortgage rates won’t move more than two BPS over the next week or so. The remaining 44 percent were evenly split over whether rates will rise or fall.

However, tomorrow’s employment report could throw a monkey wrench into the predictions and push rates higher if employment is strong or pull rates down if the data is weak.

In Freddie’s September 2015 Economic and Housing Market Outlook, 30-year fixed rates are expected to average 4.2 percent in the fourth quarter then rise 20 BPS each of the following two quarters.

Freddie’s regulator and conservator, the Federal Housing Finance Agency, reported that conforming, conventional 30-year fixed rates averaged 4.20 percent in August, no different than in July.

Rates on jumbo mortgages were 17 BPS less than on conforming loans in the U.S. Mortgage Market Index report from Mortgage Daily and OpenClose for the week ended Sept. 25. The jumbo-conforming spread thinned from a negative 22 BPS a week prior.

Average fixed rates on 15-year mortgages were 3.07 percent, dipping a single basis point from the week ended Sept. 24, Freddie said.
Borrowers on 15-year loans had rates that were 78 BPS less than on 30-year mortgages, the same spread as in the last report.

Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.91 percent in the most-recent report, the same as seven days earlier.

In its economic forecast, Freddie expects hybrid ARMs to average 3.4 percent in the current quarter, 3.7 percent in the first-three months of next year and 4.0 percent in the second-quarter 2016.

One-year Treasury-indexed ARMs averaged 2.53 percent in Freddie’s survey, the same as in the previous week. But one-year ARMs have moved up 11 BPS from the week ended Oct. 2, 2014.

Freddie predicts that one-year ARMs will average 2.6 percent in the fourth-quarter 2015 then increase 10 BPS each of the following two quarters.

The yield on the one-year Treasury note, which determines the degree of rate changes on one-year ARMs, was 0.31 percent at the market’s close today, off slightly from 0.32 percent one week prior, based on Treasury Department data.

There was no change over the past week in the six-month London Interbank Offered Rate, which reported at 0.53 percent as of Wednesday.

ARM rate locks accounted for 10.5 percent of all rate locks in the latest Mortgage Market Index report, down from 11.8 percent one week earlier.

Freddie predicts that ARM share will go from nine percent in the second-half 2015 to 13 percent in the first-quarter 2016 and increase one percentage point each of the following three quarters.

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