Mortgage Rates Dip, But Likely to Skyrocket

Rates

Mortgage rates retreated a modest amount just one week after climbing to a seven-year high. The next rate report, however, is likely to reflect significant escalation.

Prospective 30-year borrowers using the LendingTree network during September were offered an average annual percentage rate of 5.09 percent, climbing 10 basis points from one month previous.

Last month’s average APR, which is based on conforming fixed rates, was 4.39 percent for customers who had the best profiles, those in the 95th percentile, according to Charlotte, North Carolina-based LendingTree.

More recently, 30-year fixed rates averaged
4.71 percent in the seven days ended Oct. 4, according to Freddie Mac’s Primary Mortgage Market Survey. The average eased 1 basis point from a week earlier — when it soared to the highest level since the week ended April 28, 2011. But the average was 86 BPS worse than a year earlier.

Freddie Mac Chief Economist Sam Khater said in the report, “There is upside risk to mortgage rates as the economy remains very robust, and this is reflected in the very recent strength in the fixed income and equities markets.”

In line with Khater’s comments,
Mortgage Daily’s analysis of Treasury market activity indicates that fixed rates might be approximately 9 or so BPS worse in Freddie’s next survey.

A plurality of panelists surveyed by Bankrate.com for the week Oct. 3 to Oct. 9 predicted rates will rise at least 3 BPS over the next week. A decline was expected by 36 percent, and 18 percent projected no change.

Jumbo interest rates were 16 BPS higher than conforming rates in
the U.S. Mortgage Market Index report from Mortgage Daily and OpenClose for the week ended Sept. 28, the same spread as a week previous.

Freddie reported average 15-year fixed rates at 4.15 percent. Like the 30 year, 15-year rates dipped a basis point from the week ended Sept. 27. Fifteen-year rates, however, have rocketed a hundred BPS from the same week a year ago. The spread between 15- and 30-year rates remained at 56 BPS.

Five-year, Treasury-indexed, hybrid adjustable-rate mortgages averaged 4.01 percent in Freddie’s survey, 4 BPS worse than in the last report.

Treasury Department data indicate that the index for hybrid ARMs, the yield on the one-year Treasury note, closed Thursday at 2.63 percent, climbing from 2.58 percent the prior Thursday.

The Wall Street Journal reported the six-month London Interbank Offered Rate at 2.60888 percent, moving up from 2.59350 percent seven days sooner.

Once LIBOR is retired, the
Secured Overnight Financing Rate will take it’s place. The Federal Reserve Bank of New York reported SOFR at 2.20 percent as of yesterday, soaring from just 1.92 percent the preceding Wednesday.

The Cost of Funds Index was reported by the Federal Home Loan Bank of San Francisco at 1.015 percent as of August, off from 1.018 percent during July.

ARM share in the latest Mortgage Market Index report was 18.7 percent, widening from 18.5 percent in the last report.

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