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Rates Likely to Jump

Mortgage rates increased this past week, and market signals point to even higher rates next week.

The average 30-year fixed-rate mortgage was 4.92% in Freddie Mac’s Primary Mortgage Market Survey for the week ended Oct. 15, climbing from 4.87% a week earlier. The 30-year was 6.46% a year ago.

In an economic forecast issued earlier this week, Freddie pegged the average 30-year at 4.9% during the fourth quarter, compared to 5.2% in the third quarter.

The average 15-year fixed-rate mortgage rose 4 BPS from the previous week to 4.37%, Freddie said.

Mortgage rates are headed higher according to more than two-thirds of the 100 panelists surveyed for the week Oct. 15 to Oct. 21. One-quarter projected that rates will not change more than 2 BPS during the next 35 to 45 days, and 8% expected lower rates ahead.

The yield on the 10-year Treasury bond was 3.443% during trading today, 28 BPS worse than 3.164% last week and an indication that mortgage rates are headed higher.

Up 3 BPS from a week earlier, the five-year Treasury-indexed hybrid adjustable-rate mortgage was 4.38% in Freddie’s survey.

The one-year Treasury-indexed ARM, meanwhile, was 4.60% in the latest week, 7 BPS worse than the prior week but 56 BPS better than 12 months earlier. The index for the one-year ARM, the yield on the one-year Treasury bill, was 0.35% yesterday, up 0.01% from seven days prior, according to data from the U.S. Department of the Treasury.

Freddie’s outlook indicated the one-year Treasury bill would yield 0.4% during the current quarter, lower than 0.5% in the third quarter.

A widely used index for subprime ARMs, the London Interbank Offered Rate, was 0.60% yesterday, unchanged from the previous week, reported.

Applications for ARMs accounted for 6.2% of activity in Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Oct. 9, nudging up from 6.1% the prior week.

Third- and fourth-quarter ARM share was estimated at 4% in Freddie’s outlook.

MBA’s report indicated that overall applications eased 2% on a week-to-week basis. The decline was the result of a 5% drop in purchase activity. Refinances, meanwhile, were nearly unchanged — though refinance share crept up to 67% from 66% a week earlier.

Freddie expects refinance share to ease to 55% from the third quarter’s 57%.

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