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Mortgage Rates Edge Higher

Rates

Following a week when fixed mortgage rates dipped to the
lowest level since 2013, interest rates bounced higher.

Thirty-year fixed rates averaged 3.66 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Jan. 29.

Long-term mortgage rates increased from the previous week, when the average was 3.63 percent — the lowest since May 2013.

In the report, Freddie Mac Deputy Chief Economist Len Kiefer said the improvement followed positive home sales reports.

New home sales surged 11.6 percent in December beating market expectations,” Kiefer said. “Likewise, existing home sales rose 2.4 percent to an annual rate of 5.04 million homes in December.”

But 30-year rates were lower than the same week last year, when they averaged 4.32 percent.

On conforming, 30-year, fixed-rate mortgages, the average rate was 4.19 percent for all of last month, 5 BPS less than in November, the Federal Housing Finance Agency reported.

Ellie Mae Inc. reported that it tracked 30-year rates at 4.251 percent in December, down 2 BPS from a month earlier.

Mortgage Daily’s analysis of Treasury market activity indicates fixed rates could be the same or slightly lower in the next report.

Panelists at Bankrate.com for the week Jan. 29 to Feb. 4 seem to confirm Mortgage Daily’s prediction, with 42 percent projecting no change, another 42 percent forecasting rates will fall at least 3 BPS, and just 16 percent expecting an increase.

An economic forecast from Fannie Mae has 30-year fixed rates at 3.9 percent in the first quarter and rising 10 BPS each quarter for the rest of the year.

The Mortgage Bankers Association forecasts that 30-year rates will average 3.9 percent during the first three months of 2015, rise to 4.3 percent in the second quarter and ascend to 4.7 percent in the third quarter.

Prospective jumbo borrowers were quoted interest rates that were 19 BPS higher than conforming borrowers in the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Jan. 23. The jumbo-conforming spread widened from 15 BPS the previous week.

Freddie’s survey had 15-year fixed rates averaging 2.98 percent, 5 BPS worse than in the prior report. The deterioration reduced the spread between 15- and 30-year rates
to 68 BPS from 70 BPS seven days earlier.

Ellie’s report had 15-year mortgages accounting for 9.9 percent of December mortgage originations, down from the prior month’s 10.3 percent share.

Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.86 percent, Freddie said. The average was 3 BPS higher than in the last report.

Fannie’s forecast projects hybrids to average 3.0 percent in the current quarter and 3.1 percent in the second quarter.

One-year ARMs averaged 2.38 percent, according to Freddie’s survey. The one year was 1 basis point worse than in the week ended Jan. 22 but 17 BPS better than the week ended Jan. 30, 2013.

Fannie predicts one-year ARMs will average 2.4 percent in the first quarter and 2.5 percent in the second quarter.

One-year ARMs adjust based on the one-year Treasury yield, which closed Thursday at 0.17 percent, the same as seven days prior.

A segment of the subprime ARM population adjusts based on the six-month London Interbank Offered Rate. Bankrate.com reports LIBOR was 0.36 percent as of Wednesday, the same as one week prior.

Ellie said ARM share of loan originations was 5.8 percent last month, down from 6.1 percent in November.

The most-recent Mortgage Market Index report had ARM share at 9.4 percent, off from the prior week’s 9.5 percent.

ARM share is expected to be 8 percent in the first half of the year and 9 percent in the second half, according to Fannie’s outlook.

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