Fixed mortgage rates surged this week, and market data indicate that there is little chance they will retreat by next week’s report. One adjustable-rate product, however, was lower.
Thirty-year fixed rates averaged 3.81 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended May 30.
The last time the 30 year was this high was the week ended May 10, 2012, when the rate was 3.83 percent.
“Fixed mortgage rates followed long-term government bond yields higher following a growing market sentiment that the Federal Reserve may lessen its accommodative policy stance,” Freddie Mac Chief Economist Frank Nothaft explained in the report. “Improving economic data may have encouraged those views. For instance, the Conference Board reported that confidence among consumers rose in May to its highest level since February 2008.”
Freddie’s regulator and conservator, the Federal Housing Finance Agency, reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders index was 3.56 percent for loans closed in late April, “up 0.02 percent from March.”
Most Federal Reserve directors voted on April 25 to keep the primary credit rate at 3/4 percent.
Fed meeting minutes indicate that economic expansion has been moderate, and economic activity has been mixed. In addition, the housing sector has improved, job growth is considered modest and unemployment remained elevated.
“Overall, directors continued to see downside risks to the outlook, and they expressed concern that unresolved fiscal issues could be restraining hiring and economic growth more broadly,” the minutes said. “Inflation was seen as subdued, and longer-term inflation expectations generally had remained stable.”
Mortgage rates aren’t likely to be a whole lot different in Freddie’s next survey based on a Mortgage Daily analysis of this week’s Treasury market activity.
Data provided by the Department of the Treasury indicate that the benchmark 10-year Treasury note yield averaged 2.10 percent during the period which Freddie surveyed lenders for this week’s report, while the 10-year yield closed at 2.13 percent Thursday.
Forty percent of panelists surveyed by Bankrate.com for the week May 30 to June 5 predicted that mortgage rates will increase at least 3 BPS over the next week, though the same share saw lower rates ahead. Just 20 percent expect no movement.
The U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended May 24 indicated that jumbo mortgages were priced 26 BPS higher than conforming loans, virtually unchanged from a week prior.
Freddie reported the average 15-year, fixed-rate mortgage at 2.98 percent, up 21 BPS from the week ended May 23. At 83 BPS, the spread between 15- and 30-year mortgages widened from 82 BPS in the previous report.
The five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 2.66 percent versus 2.63 percent last week, according to Freddie’s survey.
A one-basis-point decline from a week earlier left the one-year Treasury-indexed ARM averaging 2.54 percent in Freddie survey. The one year averaged 2.75 percent in the week ended May 31, 2012.
The index for the one-year ARM, the yield on the one-year Treasury note, inched up to 0.13 percent today from 0.12 percent last Thursday, according to the Treasury Department data.
At 0.42 percent as of Wednesday, the six-month London Interbank Offered Rate was the same as the previous Wednesday, according to Bankrate.com.
ARMs accounted for 4.5 percent of activity in the latest Mortgage Market Index report. ARM share was 4.7 percent a week earlier.