Fixed mortgage rates retreated but are likely to be higher in next week’s report. Adjustable rates, meanwhile, moved higher.
A 2-basis-point decline from last week was reported for the 30-year fixed-rate mortgage, which averaged 3.32 in Freddie Mac’s Primary Mortgage Market Survey for the week ended Dec. 13. In the same week last year, the benchmark mortgage averaged 3.94 percent.
“Mortgage rates held relatively steady following the November employment report,” Freddie Mac Chief Economist Frank Nothaft explained in the survey. “Although 146,000 jobs were created, above the market consensus forecast of 85,000, revisions subtracted 49,000 workers over the September and October period. The unemployment rate fell from 7.9 to 7.7 percent. However, in its December 12 monetary policy statement, the Federal Reserve noted that this rate remains elevated and modified the statement to tie any increases to its target rate to the unemployment rate falling below 6.5 percent.”
Rate watchers can expect a 7-basis-point increase in mortgage rates by the time Freddie’s next survey roles around based on a Mortgage Daily analysis of Treasury market activity. The Department of the Treasury reported that the yield on the 10-year Treasury note closed at 1.74 percent Thursday, up from the average of 1.67 percent for the days that Freddie surveyed lenders this week.
In Bankrate.com’s survey for the week Dec. 13 to Dec. 19, 42 percent of panelists predicted rates won’t move more than 2 BPS, while the same share forecasted a decline. Just 16 percent predicted an increase.
On a longer-term basis, Freddie predicted in its December 2012 Economic and Housing Market Outlook that the 30-year mortgage will average 3.4 percent in the fourth quarter and in the following quarter, then rise 10 BPS each quarter for the remainder of the year.
The average jumbo mortgage was priced at a 55-basis-point premium over the average conforming rate in the U.S. Mortgage Market Index report from Mortech and Mortgage Daily for the week ended Dec. 7. A week earlier, the jumbo-conforming spread was less at 51 BPS.
At 2.66 percent, the 15-year fixed-rate mortgage averaged 1 basis point less than it did in Freddie’s previous survey. There was a 66-basis-point spread between 15- and 30-year mortgages this week, not as good as 67 BPS in the week ended Dec. 6.
The five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 2.70 percent in Freddie’s latest survey, up from 2.69 percent last week.
Also rising was the one-year Treasury-indexed ARM, which climbed to 2.53 percent from 2.55 percent, according to Freddie. The one-year ARM averaged 2.81 percent in the week ended Dec. 15, 2011.
In Freddie’s forecast, the one year is expected to go from 2.6 percent in the fourth quarter to 2.7 percent in the first-half 2013 and 2.8 percent in the second half.
The index for the one-year ARM, the yield on the one-year Treasury note, tumbled to 0.14 percent Thursday from 0.18 percent seven days prior, according to Treasury Department data.
An alternative ARM index, the six-month London Interbank Offered Rate, was 0.52 percent as of Wednesday, according to Bankrate.com. LIBOR fell from 0.53 percent a week earlier.
ARM share was 2.4 percent in the latest Mortgage Market Index, a little fatter than 2.2 percent a week previous.
ARM share of production will be 8 percent this quarter, according to Freddie, then climb to 10 percent in the first quarter of next year and rise 100 BPS each quarter during the rest of 2013.