Interest rates on home loans fell this week and might hold steady over the short term. On a longer-term basis, rates are headed higher.
At 3.51 percent, 30-year fixed-rate mortgages averaged 5 basis points less than a week earlier, according to Freddie Mac’s Primary Mortgage Market Survey for the week ended Feb. 28. The 30 year was 3.90 percent a year earlier.
“Mortgage rates eased somewhat as the consumer price index in February held steady for the second month in a row,” Freddie Mac Chief Economist Frank Nothaft explained in the weekly report.
Freddie’s regulator and conservator, the Federal Housing Finance Agency, reported that 30-year conforming mortgages were 3.53 percent in January, up 6 BPS from December.
Mortgage rates are likely to be the same in next week’s report from Freddie based on a Mortgage Daily analysis of Treasury market activity. The yield on the 10-year Treasury note averaged 1.89 percent during the period that Freddie surveyed lenders for this week’s report, according to Treasury Department data. On Thursday, the 10-year yield closed at 1.89 percent.
A plurality of panelists surveyed for Bankrate.com’s Feb. 28 report disagreed with the Mortgage Daily forecast and predicted rates will fall at least 3 BPS over the next week or so. The rest –54 percent — were evenly split over whether rates would rise or rest.
The projection by the Mortgage Bankers Association calls for 30-year mortgages to average 3.6 percent in the first quarter and 3.8 percent in the second quarter then rise every three months until mid-2014, when they are expected to average 4.5 percent.
Jumbo mortgages were priced at a 25-basis-point premium over conforming loans in the U.S. Mortgage Market Index report from Optimal Blue and Mortgage Daily for the week ended Feb. 22. The jumbo-conforming spread widened from the previous week’s 16-basis-point spread.
Freddie reported that average 15-year fixed-rate mortgage at 2.76 percent, a basis point below the week ended Feb. 21. The spread between short- and long-term rates narrowed to 75 BPS from last week’s 79 BPS.
A 3-basis-point drop over the prior seven days left the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage at 2.61 percent in Freddie’s survey.
The one-year Treasury-indexed ARM averaged 2.64 percent, off from 2.65 percent in Freddie’s prior report. The one year averaged 2.72 percent in the week ended March 1, 2012.
Serving as the index for the one-year ARM is the yield on the one-year Treasury note, which inched up to 0.17 percent Thursday from 0.16 percent a week earlier based on the data from the Department of the Treasury.
There was no change over the past seven days for the six-month London Interbank Offered Rate, which Bankrate.com reported at 0.46 percent as of Wednesday.
ARMs accounted for 4.2 percent of all activity in the most-recent Mortgage Market Index report, the same as a week prior.
ARM share in MBA’s outlook is predicted to be 7 percent from the current quarter through the end of the first-quarter 2014.