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Mortgage Rates Slip, Could Move Up

With a dearth of economic data this week, interest rates on home loans meandered lower. But one indicator suggests rates could increase in the next report.

A 4-basis-point decline over the past seven days left 30-year fixed rates averaging 4.42 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Dec. 12. Long-term rates were up 110 BPS, however, compared to a year earlier.

Frank Nothaft, Freddie’s chief economist, said there was little economic data to move interest rates up or down this week.

Notfhaft did note, however, that single family mortgage debt outstanding increased for the first time since 2008, “a positive sign as it reflects that the pick-up in new purchase-money originations has offset loan paydowns and led to a net increase in principal outstanding.”

Thirty-year rates could be around 5 BPS higher in Freddie’s next report based on an analysis of Treasury market activity.

Data reported by the Department of the Treasury indicates that the 10-year Treasury note yield averaged 2.84 percent during the days that Freddie surveyed lenders for this week’s report. The 10-year yield closed at 2.89 percent Thursday.

A majority of panelists surveyed by Bankrate.com for the week Dec. 12 to Dec. 18 predicted that mortgage rates won’t move more than 2 BPS over the next week or so. A third forecasted an increase, and only 11 percent projected lower rates.

Jumbo mortgage rates were priced at an 85-basis-point premium over conforming rates in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended Dec. 6, surging from 37 BPS a week earlier.

Freddie reported 15-year fixed rates at an average of 3.43 percent, down from 3.47 percent in the week ended Dec. 5. Fifteen-year rates were 99 BPS cheaper than 30-year mortgages, the same spread as last week.

Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.94 percent in Freddie’s report, 5 BPS better than last week.

One-year Treasury-indexed ARMs tumbled 8 BPS to 2.51 percent and were lower than 2.53 percent in the week ended Dec. 12, 2012.

As of Thursday, the yield on the one-year Treasury note — which serves as the index for one-year ARMs — was 0.14 percent, according to Treasury data. The one-year yield was 0.13 percent a week earlier.

Bankrate.com reported that the six-month London Interbank Offered Rate was 0.34 percent as of Wednesday. LIBOR didn’t move from the previous week.

ARM share was 3.9 percent in the latest Mortgage Market Index report, the same as a week earlier.

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