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Rates Increase But Might Retreat

Rates

After falling to all-time lows last week, mortgage rates had nowhere to go but up — which they did. Now it looks like they might be headed back down.

A 10-basis-point rise from last week left the average, 30-year, fixed-rate mortgage at 3.98 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Jan. 26. The 30 year was 4.80 percent during the same week in 2011.

Frank Nothaft, chief economist for McLean, Va.-based Freddie, noted that rates rose as the housing market finished the year on a “high note.”

The average, 30-year, fixed-rate, conforming mortgage was 4.32 percent during December, according to Freddie’s regulator, the Federal Housing Finance Agency. The 30 year dropped 8 BPS from November.

Rates could see-saw and wind up around 10 BPS lower in next week’s survey based on an analysis of data from the Department of the Treasury. The yield on the 10-year Treasury note averaged 2.06 percent during the three days Freddie surveyed its 125 mortgage lenders, while the 10-year yield closed at 1.96 percent today.

Treasury yields retreated following yesterday’s comments from the Federal Reserve that rates will be kept low for another two years.

“To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the committee expects to maintain a highly accommodative stance for monetary policy,” a Federal Open Market Committee statement Wednesday said. “In particular, the committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

An increase of at least 3 BPS over the next week or so was predicted by 44 percent of the panelists surveyed by Bankrate.com for the week Jan. 26 to Feb. 1. Nearly a third forecasted a decline, and a quarter saw no changes ahead.

Prospective borrowers who were shopping for a jumbo loan were quoted a rate that was 64 BPS higher than the rate for conforming borrowers, according to the U.S. Mortgage Market Index report for the week ended Jan. 20 from Mortech Inc. and MortgageDaily.com. The jumbo-conforming spread was more narrow than the 67 BPS in the prior report.

Freddie reported the average 15-year mortgage at 3.24 percent, 7 BPS more than in the prior survey. Borrowers applying for 15-year loans had a rate that was 74 BPS better than 30-year borrowers, improving from the 71-basis-point discount in the prior report.

Climbing 3 BPS during the past seven days, the average, five-year, Treasury-indexed, hybrid, adjustable-rate mortgage was 2.85 percent in Freddie’s survey.

The one-year Treasury-indexed ARM was unchanged from the prior week at 2.74 percent but was lower than 3.26 percent one year earlier.

The Treasury Department reported that the yield on the one-year Treasury note, which is used to determine rate changes on one-year ARMs, closed at 0.12 percent today, a basis point higher than last Thursday.

An alternative ARM index, the six-month London Interbank Offered Rate — or LIBOR — was unchanged from last Wednesday at 0.79 percent, Bankrate.com reported.

ARMs accounted for 4.81 percent of all inquiries in the Mortgage Market Index report, rising from the 4.50 percent share in the previous report.

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