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Fixed Rates Rise, ARMs Unchanged


Fixed mortgage rates were higher this week, while no movement was recorded for adjustable-rate mortgages. Although rates are expected to rise this year, no changes appear imminent.

Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Jan. 24 that the 30-year fixed-rate mortgage averaged 3.42 percent, climbing 4 basis points from the previous week. During the same week in the previous year, 30-year loans averaged 3.98 percent.

Not much change can be expected in mortgage rates in the next report based on a Mortgage Daily analysis of Treasury market activity.

The yield on the 10-year Treasury note averaged 1.86 percent during the days that Freddie surveyed its primary lenders for this week’s survey, according to data released by the Department of the Treasury. The 10-year yield closed today at 1.88 percent.

A majority of panelists surveyed by for the week Jan. 24 to Jan. 30 came to the same conclusion, predicting that rates won’t move more than 2 BPS over the next week or so. An increase was forecasted by 38 percent, and just 8 percent predicted a decline.

Fannie Mae predicted in its Housing Forecast: January 2013 that 30-year loans will average 3.4 percent this quarter, 3.5 percent in the second quarter and 3.6 percent in the third quarter.

The Mortgage Bankers Association, meanwhile, forecasted the 30 year to average 3.8 percent in the first quarter and rise 20 BPS each quarter for the remainder of 2013.

Jumbo mortgages were priced at a 30-basis-point premium over conforming loans, according to the U.S. Mortgage Market Index report from Optimal Blue and Mortgage Daily for the week ended Jan. 18. The jumbo-conforming spread narrowed from 33 BPS in the previous report.

As was the case last week, the six-month London Interbank Offered Rate was again down 1 basis point to 0.48 percent as of Wednesday, reported.

Fifteen-year fixed-rate mortgages averaged 2.71 percent in Freddie’s survey, climbing from 2.66 percent in the week ended Jan. 17. Borrowers who opted for shorter terms benefited from a 71-basis-point discount over 30-year borrowers, not as good as the 72-basis-point spread in the prior survey.

Freddie reported that the five-year, Treasury-indexed, adjustable-rate mortgage averaged 2.67 percent, unchanged from a week earlier.

One-year Treasury-indexed ARMs averaged 2.57 percent in Freddie’s survey, also unchanged from the previous week. The one year was 2.74 percent in the week ended Jan. 26, 2012.

Fannie expects one-year ARMs to average 2.6 percent in the first and second quarters, then increase by 10 BPS each quarter through the first-quarter 2014.

The yield on the one-year Treasury note, which serves as the index for the one-year ARM, closed at 0.15 percent Thursday, according to Treasury Department data. A week earlier, the one-year Treasury yield was 0.14 percent.

ARMs represented 3.3 percent of overall activity in the latest Mortgage Market Index report, slipping from a 3.4 percent ARM share one week prior.

Fannie predicts that ARM share will be 4 percent during the first-half 2012 and 6 percent in the third quarter.

MBA projects that ARM share will be 6 percent in the first quarter and 7 percent for the remainder of the year.

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