Although fixed mortgage rates tumbled this week, they are likely to bounce back up in next week’s report. Fifteen-year loans became far more appealing.
At 3.92 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday, 30-year fixed rates were down 5 basis points from a week earlier.
The 30 year was substantially lower than during the same week last year, when it averaged 4.13 percent. The last time 30-year rates were this low was in the week ended June 6, 2013, when the average was 3.91 percent.
For all of September, Ellie Mae reports that 30-year fixed rates on closed loans averaged 4.381 percent, slipping from 4.386 percent in August.
Thirty-year rates are set to climb around 6 basis points in Freddie’s next report based on an analysis of Treasury Market activity. The 10-year Treasury yield averaged 2.23 percent during the period Freddie surveyed lenders, based on Department of the Treasury data, while it closed at 2.29 percent Thursday.
But most of the panelists surveyed by Bankrate.com for the week Oct. 23 to Oct. 29 predicted that mortgage rates won’t move more than 2 BPS over the next week. Eight percent forecasted an increase, and none saw a decline ahead.
McLean, Va.-based Freddie predicts that 30-year rates will average 4.1 percent this quarter then rise 20 BPS each of the following two quarters.
In Fannie Mae’s October forecast, 30-year rates are expected to average 4.3 percent this quarter then rise 10 BPS each quarter through the end of next year.
Like Fannie, the Mortgage Bankers Association predicts 30-year rates will average 4.3 percent in the fourth-quarter. But MBA has 30-year rates jumping to 4.6 percent in the first quarter of next year and 4.7 percent in the following three months.
Jumbo mortgage rates were 5 BPS less than conforming rates in the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily the week ended Oct. 17. The jumbo-conforming spread thinned from a negative 12 BPS in the previous report.
Freddie reported average 15-year fixed rates at 3.08 percent, 10 basis points better than in the week ended Oct. 16. Fifteen-year mortgages looked more attractive this week at 84 BPS less than 30-year mortgages versus the 79-basis-point spread in the previous report.
At 2.91 percent in Freddie’s survey, five-year, Treasury-indexed, hybrid, adjustable-rate mortgages were off 1 basis point from a week earlier. Freddie’s forecast has hybrid ARMs going from 3.1 percent in the fourth quarter to 3.3 percent in the first three months of next year and 3.6 percent in the second quarter.
Fannie has hybrid ARMs averaging 3.2 percent in the current quarter then increasing 10 BPS each of the following two quarters.
The only week-over-week increase was with one-year Treasury-indexed ARMs, which averaged 2.41 percent, up 3 BPS from the prior week. One-year ARMs averaged 2.60 percent in the week ended Oct. 24, 2013.
Freddie expects one-year ARMs to average 2.5 percent in the current and following quarters then rise to 2.6 percent in the second-quarter 2015.
Fannie’s forecast has one-year ARMs rising from 2.5 percent this quarter to 2.6 percent in the first three months of next year and 2.8 percent in the second quarter.
The yield on the one-year Treasury note, which dictates changes on one-year ARM rates and payments, was 0.11 percent as of Thursday, a basis point more than seven days prior, according to the Treasury Department data.
The six-month London Interbank Offered Rate — or LIBOR — was 0.32 percent Wednesday, the same as one week prior, according to Bankrate.com.
ARM share was 6.3 percent last month, Ellie reported. ARM share increased from 6.2 percent in August.
The most recent Mortgage Market Index report had ARM share of pricing inquiries falling to 12.1 percent from 12.3 percent seven days earlier.
Freddie has ARM share rising from 11 percent this quarter to 12 percent in the first-quarter 2015 and 13 percent the following quarter.
At its secondary cousin Fannie, ARM share is projected to be 10 percent in the current and following quarters and 11 percent in the second-quarter 2015.