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Rates Rising

Rates

Mortgage rates crept higher, and bond market activity suggests another 10-basis-point increase might be ahead.

A 5-basis-point jump landed the average 30-year fixed-rate mortgage at 4.81 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday. At this same point in 2010, the 30-year was 4.99 percent.

“The rate uptick was related to higher-than-anticipated inflation data for February and ongoing geopolitical concerns,” explained Freddie Chief Economist Frank Nothaft in the report.

By next Thursday’s report from Freddie, the 30-year will likely be around another 10 BPS higher based on the 10-year Treasury bond yield. Data reported by the Department of the Treasury and WSJ.com indicate the yield has risen to 3.39 percent during trading today from last Thursday’s close of 3.25 percent.

Panelists surveyed by Bankrate.com for the week March 24 to March 30 were mixed, with 47 percent each predicting an increase and no change during the next week and 6 percent forecasting a decline of at least 3 BPS.

On a longer-term basis, Fannie Mae predicted in its monthly housing forecast that the 30-year will rise from a 4.9 percent average this quarter to 5.2 percent in the second three-month period of this year then rise 1 basis point each quarter until the end of next year.

The spread between conforming and jumbo mortgages sank to 63 BPS from 73 BPS last week, based on the U.S. Mortgage Market Index report for the week ended March 18 from Mortech Inc. and MortgageDaily.com.

Freddie said the 15-year fixed-rate mortgage climbed 7 BPS from last week to average 4.04 percent in the most recent report. The 15-year movement helped cut the spread between the 15-year and the 30-year to 77 BPS from 79 BPS.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.62 percent in this week’s survey from Freddie, 5 BPS higher than the prior survey.

A 4-basis-point rise was recorded by Freddie for the one-year Treasury-indexed ARM, which averaged 3.21 percent this week and 4.2 percent a year earlier. Fannie projects that the one-year ARM will climb from 3.4 percent in the first quarter to 3.6 percent and continue to rise through 2013.

The underlying one-year Treasury yield closed yesterday at 0.24 percent, higher than 0.21 percent seven days earlier, according to the Treasury Department. The six-month LIBOR was again unchanged at 0.46 percent, according to Bankrate.com.

ARM share, based on loan pricing inquiries, was 9.43 percent this week in the Mortgage Market Index report, lower than 9.49 percent last week.

ARM share, based on applications, will average 5 percent this quarter, according to Fannie’s forecast, then edge up to 6 percent in the next two quarters. Fannie has ARM share climbing to 15 percent by 2013.

The Mortgage Market Index report indicated that refinance share climbed to 50 percent of pricing inquiries from last week’s 48 percent share.

Fannie’s outlook says refinance share of originations will drop from 58 percent during the first three months of 2011 to 29 percent in the second quarter then drift between 20 percent and 27 percent through 2013.

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