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Fixed Rates Worsen, Could Keep Climbing

Rates

It’s been more than two months since mortgage rates were this high, and all signs point to further increases. Short-term adjustable rates, however, moved lower.

At 4.46 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Dec. 5, thirty-year fixed rates were 17 basis points higher than in the previous report.

The last time 30-year mortgage rates were this high was in the week ended Sept. 19, when the 30 year averaged 4.50 percent.

Thirty-year mortgage rates have soared compared to the same week last year, when the average was 3.34 percent.

Freddie Mac Chief Economist Frank Nothaft attributed the rise in fixed rates to stronger-than-expected economic data.

“Private companies added 215,000 new jobs in November according to the ADP employment report, well above the consensus. In addition, revisions added 54,000 jobs in the prior month,” Nothaft explained. “Lastly, new home sales rose 25 percent in the month of October to a seasonally adjusted 444,000 annual pace, though this followed a weaker than expected September report and downward revisions over the summer months.”

|It’s looking like mortgage rates will rise even further in Freddie next report based on an analysis of Treasury market activity.

The 10-year Treasury yield averaged 2.81 percent during the period when Freddie surveyed lenders this week, data from the Department of the Treasury indicate. The 10-year yield closed at 2.88 percent of Thursday.

A majority of panelists surveyed by Bankrate.com for the week Dec. 5 to Dec. 11 agreed with Mortgage Daily’s forecast and expect rates to rise at least 3 BPS over the next week. Just over a quarter forecasted no change, and only 18 percent predicted a decline.

The jumbo-conforming spread climbed to 37 BPS in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily in the week ended Nov. 29 from the previous week’s 35 BPS.

Fifteen-year fixed rates averaged 3.47 percent in Freddie’s report, climbing 17 BPS from the week ended Nov. 27. The spread between 15- and 30-year loans was 99 BPS, the same as last week.

Freddie said that a 5-basis-point increase from seven days earlier left five-year, Treasury-indexed, hybrid, adjustable-rate mortgages at 2.99 percent.

A 1-basis-point decline was reported for one-year Treasury-indexed ARMs, which averaged 2.59 percent in Freddie’s latest report. One-year ARMs were 2.55 percent in the week ended Dec. 6, 2012.

One-year ARMs adjust based on the one-year Treasury note yield, which was 0.13 percent Thursday, the same as a week earlier, according to Treasury Department data.

The six-month London Interbank Offered Rate, or LIBOR, was unchanged from seven days earlier at 0.34 percent as of Wednesday, according to Bankrate.com.

ARM share was 3.9 percent in the most recent Mortgage Market Index report.

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