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Retreating Rates Likely to Rise

Rates

Fixed rates dropped this week but look to be headed higher in next week’s report. The 15-year mortgage became a less attractive option this week.

The 30-year mortgage trimmed 5 basis points off of last week’s average fixed rate to land at 3.90 percent in Freddie Mac’s survey of 125 mortgage lenders for the week ended March 1. In the same week last year, the 30 year was 4.87 percent.

During the month of January, the average 30-year mortgage for a home purchase was 4.33 percent, 1 basis point higher than in December, according to the Federal Housing Finance Agency.

Freddie Chief Economist Frank Nothaft said that fixed-rates “bottomed out” in January and February and helped to spur the housing market.

An analysis of data released by the Department of the Treasury suggests that mortgage rates could be around 8 BPS worse in Freddie’s next weekly survey. During the period that Freddie surveyed its lenders for this week’s report, the 10-year yield averaged 1.95 percent. The 10-year yield closed today at 2.03 percent.

Just a third of panelists surveyed by Bankrate.com for the week March 1 through March 7 forecasted that rates will rise over the next week. But 60 percent expected rates to stay within 2 BPS of their current levels, and only 7 percent predicted a decline.

Rates for jumbo borrowers were 64 BPS higher than on conforming loans in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Feb. 24. The jumbo-conforming spread was the same a week earlier.

Freddie reported the average 15-year mortgage at 3.17 percent, 2 BPS better than the prior report. The spread, however, between the 15 year and the 30 year fell to 73 BPS from 76 BPS a week earlier — leaving the 15 year a little less attractive than in the last report.

An increase from last week of 3 BPS was reported by Freddie for the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage, which came in at 2.83 percent this week.

But the one-year Treasury-indexed ARM fell a basis point from last week to 2.72 percent. Freddie said that the one-year ARM averaged 3.23 percent in the same week during 2011.

The underlying index for the one-year ARM, the yield on the one-year Treasury note, closed at 0.18 percent today, up from 0.17 percent a week prior, based on Treasury Department data.

There was no weekly change in the six-month London Interbank Offered Rate, which Bankrate.com reported at 0.75 percent as of Wednesday.

ARM share increased to 4.71 percent in the latest Mortgage Market Index report from 4.13 percent the previous week.

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