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Record Rates Poised to Rise

Rates

Rates won’t remain long in record territory based on Thursday’s Treasury market activity. But the wild card is Friday’s employment report.

Never has a 30-year fixed-rate mortgage under 3.4 percent been reported by secondary lending giant Freddie Mac. But that all changed Thursday when the Primary Mortgage Market Survey for the week ended Oct. 4 indicated that the long-term mortgage had fallen to 3.36 percent.

Rates were 3.40 percent the previous week and 3.94 percent in the same week last year.

Frank Nothaft, the chief economist at the McLean, Va.-based company, continued to attribute falling rates to mortgage securities purchases by the Federal Reserve. Nothaft also pointed to lingering economic weakness.

It’s not looking like rates will maintain their record-breaking standing in next week’s report.

The yield on the 10-year Treasury averaged 1.64 percent during the days when Freddie surveyed its lenders for this week’s report, according to yield data from the Department of the Treasury. But the yield jumped to 1.70 percent today — suggesting mortgage rates could be around 6 basis points worse by the time next Thursday rolls around.

A strong employment report Friday could place even more upward pressure on mortgage rates — and work in favor of the incumbent in the presidential race. Disappointing data, however, could hold down mortgage rates and work in favor of the Republican nominee.

A majority of panelists surveyed by Bankrate.com for the week Oct. 4 to Oct. 10 don’t see any changes ahead for mortgage rates. A quarter, however, predicted that rates will fall at least 3 basis points over the next week or so, and 17 percent forecasted an increase.

Jumbo borrowers were quoted a 73-basis-point premium based on the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Sept. 28. The jumbo-conforming spread worsened from 69 BPS in the week ended Sept. 30. There wasn’t much difference from a year earlier, when the jumbo-conforming spread was 74 BPS.

A new record-low was established for the 15-year fixed-rate mortgage, which averaged 2.69 percent in Freddie’s latest report and 2.73 percent in the week ended Sept. 27. The was no change in the spread between 15- and 30-year mortgages at 67 BPS.

One product to move inversely with other mortgage rates was the hybrid adjustable-rate mortgage — which rose to 2.72 percent in Freddie’s report from 2.71 percent seven days prior. The contra-movement had the five-year Treasury-indexed ARM higher than 15-year fixed rates.

But the one-year Treasury-indexed ARM hit a new low: 2.57 percent. The one year was 2.60 percent in the previous report and 2.95 percent in the week ended Oct. 6, 2011.

The index for the one-year ARM, the yield on the one-year Treasury, closed Thursday at 0.18 percent, higher than 0.16 percent in the last report.

Another index for ARMs, the six-month London Interbank Offered Rate, or LIBOR, was down 2 BPS from a week earlier to 0.63 percent Wednesday, Bankrate.com reported.

ARM share was 2.6 percent in the latest Mortgage Market Index report, slimmer than 2.8 percent a week earlier.

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