Mortgage rates bounced off their record lows established last week. While rates are currently poised to hold at their current levels, possible Euro-drama this weekend could create significant market volatility.
A 4-basis-point increase from last week’s record low for the 30-year fixed-rate mortgage had it averaging 3.71 percent in Freddie Mac’s survey of 125 lenders for the week ended June 14 — halting a six-week record-breaking streak. But the long-term mortgage has improved 79 BPS from the same week last year.
“Fixed mortgage rates edged up slightly from record lows during a mild week of economic data releases,” stated Freddie Mac Chief Economist Frank Nothaft in the report. “The Federal Reserve Board reported that household net worth rose by $2 trillion to $62.9 trillion over the first three months of 2012 primarily due to increases in stock markets. However, this is still well below the peak of $67.5 trillion set in the third quarter of 2007.”
If the U.S. Treasury market is any indication, rates can be expected to come in near their current levels in Freddie’s next report. The yield on the 10-year Treasury note averaged 1.63 percent during the period that Freddie surveyed lenders for the latest report, while the 10-year yield closed at 1.64 percent Thursday, according to data reported by the Department of the Treasury.
However, the upcoming week could prove to be volatile for global financial markets as a result of Greece’s upcoming parliamentary election Sunday. Leaders of the liberal party Syriza have threatened to abandon debt and austerity commitments, a move that could have the country exiting the Euro Zone and moving to its own currency — the drachma. A win for Syriza — which would only make the situation more grave for countries like Spain, Italy and Ireland — could spark panic selling in world stock markets and drive down Treasury yields as investors flee to the relative safety of U.S. Treasuries. But a victory for the conservative New Democracy could have a calming effect.
Published reports have the two parties neck-and-neck.
A plurality of panelists over at Bankrate.com for the week June 14 to June 20 predicted a decline in mortgage rates of at least 3 BPS over the next week, while 36 percent forecasted no changes and just 18 percent expected an increase.
In its latest mortgage finance forecast, the Mortgage Bankers Association projected that the 30-year loan will average 3.8 percent this quarter then rise 20 BPS every three months until the first-quarter 2013.
The American Bankers Association’s forecast is calling for conventional mortgages to average 3.86 percent this quarter, 3.95 percent in the third quarter and 4.10 percent in the final quarter of this year.
The spread between jumbo and conforming loans was 65 BPSÂ in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended June 8. The premium for a jumbo mortgage worsened from 61 BPS in the prior report.
Like with the 30 year, the 15-year fixed-rate mortgage was up 4 BPS from seven days earlier, leaving the average at 2.98 percent, according to Freddie. There was no change between this week and last week in the spread between 15- and 30-year loans, which was 73 BPS.
But the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage was lower in Freddie’s survey, falling to 2.80 percent from 2.84 percent last week.
Also falling was the one-year Treasury-indexed ARM — to 2.78 percent from 2.79 percent in Freddie’s prior report. The one-year ARM was 2.97 percent during this week in 2011. The index, itself, closed at 0.15 percent today, a basis point higher than last Thursday, according to the Treasury Department data.
It’s been weeks since the six-month London Interbank Offered Rate has moved from its perch at 0.74 percent, and this week was no different, according to Bankrate.com.
ARM share slipped for the fifth consecutive week to 3.9 percent in the Mortgage Market Index report.
MBA’s outlook has ARM share at 6 percent from the second quarter through the first quarter of 2013.
