As mortgage rates climb, 15-year mortgages are becoming more attractive, adjustable-rate loans are rising in popularity and refinance activity is weakening.
Freddie Mac reported the average 30-year fixed-rate mortgage at 5.59% in its Primary Mortgage Market Survey for the week ending June 11. The 30-year jumped 30 basis points from the previous week but was 73 BPS better than a year earlier. The 30-year is higher than at any point since Nov. 26, 2008, when it averaged 5.97%.
Fewer-than-expected job losses fueled the increase, according to Freddie.
“The market expects the Federal Reserve may raise its benchmark rate sooner rather than later,” Freddie’s chief economist, Frank Nothaft, explained in the report.
The 15-year fixed-rate mortgage increased a more moderate 27 BPS from last week to 5.06%. The better performance for the 15-year pushed the spread between the 15- and 30-year to 0.53% –the widest since March 20, 2008, when it stood at 60 BPS.
The yield on the 10-year Treasury was 3.930% near midday — soaring from 3.667% last Thursday.
A majority of mortgage rate panelists agreed.
Rates will increase by at least 3 BPS during the next 35 to 45 days based on 57% of those surveyed by Bankrate.com for the week June 11 to June 17. Another 29% expected a decline, and the rest saw no changes ahead.
The five-year Treasury-indexed adjustable-rate mortgage averaged 5.17% in Freddie’s survey — jumping 32 BPS from the previous week.
But the one-year Treasury-indexed ARM was up just 23 BPS to 5.04%. The underlying one-year Treasury bill yield jumped to 0.55% from 0.45% a week earlier.
The six-month London Interbank Offered Rate — or LIBOR — increased to 1.27% as of yesterday from 1.23% seven days prior, Bankrate.com data indicated.
LIBORATED.com announced its official launch yesterday. The site offers summaries of LIBOR news and provides information about financial products and instruments with rates tied to the index. Also presented are editorials, case studies and loan product reviews.
ARM share rose to 3.4% from the prior week’s 3.0% in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended June 5. ARM share has risen from just 1.4% in April.
Refinance share, however, eased to 59% from the prior week’s 62%, MBA reported. The share dropped as applications for refinance transactions declined 12% and overall applications, on a seasonally adjusted basis, were down 7%. MBA’s Market Composite Index came in at 611.0.
Applications for loans to finance home purchases actually improved 1%, MBA said.
