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Mortgage Rates Fall Again, But Could Turn Higher

Rates

Mortgage rates moved lower for the fifth consecutive week, with the latest decline driven by weak economic data. But the recent retreat in interest rates is likely to come to an end.

In Freddie Mac’s Primary Mortgage Market Survey for the week ended Feb. 6, thirty-year fixed rates averaged 4.23 percent.

The average fell 9 basis points from seven days earlier. Compared to a year earlier, the 30 year was up 70 BPS.

Freddie Mac Chief Economist Frank Nothaft credited weaker housing and economic data for the week-over-week decline in rates.

“The pending home sales index fell 8.7 percent in December to its lowest level since October 2011,” Nothaft said in the report. “Fixed residential investment negatively contributed to GDP in the fourth quarter for the first time since the third quarter of 2010. Also, the Institute for Supply Management reported a significant slowing in growth in the manufacturing industry in December than the market consensus forecast.”

Thirty-year fixed rates have declined each week since the week ended Jan. 2, when they averaged 4.53 percent.

Fixed rates are set to rise around 8 BPS in Freddie’s next report based on this week’s Treasury market activity.

A benchmark for fixed mortgage rates, the yield on the 10-year Treasury note, averaged 2.65 percent during the days that Freddie surveyed primary lenders for this week’s report, according to Treasury Department activity. The 10-year yield closed at 2.73 percent Thursday.

However, rates could continue lower if tomorrow’s employment report comes in weak. Last month’s employment report indicated that nonfarm payrolls rose by an anemic 75,200 jobs — sending Treasury yields and mortgage rates sharply lower.

Half of the panelists surveyed by Bankrate.com for the week Feb. 6 to Feb. 12 agreed with Mortgage Daily’s forecast and predicted that rates will be at least 3 BPS worse next week. A third projected that rates won’t move, and 17 percent foresaw a decline.

Average jumbo mortgage rates were priced at just 10 BPS more than conforming rates in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended Jan. 31. The jumbo conforming spread slipped from 13 BPS the previous week.

Average 15-year fixed rates landed at 3.33 percent in Freddie’s report, down from 3.40 percent in the week ended Jan. 30. Fifteen-year loans were less appealing this week, with the spread between 15- and 30-year rates declining to 90 BPS from the prior week’s 92-basis-point spread.

A 4-basis-point decline from Freddie’s last report left five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaging 3.08 percent this week.

One-year Treasury-indexed ARMs fell to 2.51 percent from 2.55 percent and were even lower than 2.53 percent in the week ended Feb. 7, 2013.

The index for one-year ARMs, the yield on the one-year Treasury note, jumped to 0.13 percent today from 0.10 percent last Thursday according to the Treasury Department data.

Like the one-year Treasury yield, the six-month London Interbank Offered Rate is used as an index on adjustable-rate mortgages. LIBOR was 0.33 percent Wednesday, unchanged from a week earlier, Bankrate.com reported.

ARM share rose to 12.7 percent in the latest Mortgage Market Index report from 12.5 percent seven days prior.

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