Mortgage Rates Rise But Could Retreat

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Although fixed rates on home loans ascended ahead of the Federal Open Market Committee meeting, they are likely to be lower in next week’s report.

In its Origination Insight Report | February 2016, Ellie Mae Inc. reported that 30-year fixed rates averaged 4.22 percent on closed loans last month.

The average retreated from January, when it came in at 4.30 percent. But rates have risen compared to February 2015, when the average was
4.01 percent.

On conventional mortgages, 30-year rates averaged 4.29 percent in February 2016. The average was 4.17 percent on loans insured by the Federal Housing Administration and 4.01 percent on mortgages guaranteed by the Department of Veterans Affairs.

More recently, Freddie Mac reported in its Primary Mortgage Market Survey that 30-year fixed rates averaged 3.73 percent in the week ended March 17, up 5 basis points from a week prior.

“Treasury yields increased heading into this week’s FOMC meeting, partially in response to modestly higher inflation readings,” Freddie Mac Chief Economist Sean Becketti explained in the report. “Thirty-year mortgage rates kept pace, rising 5 basis points to 3.73 percent. Nonetheless, at the meeting the Fed confirmed what the market had already concluded and made no change to the Federal funds target.

“The Fed went further and acknowledged that economic signals have been mixed and that the pace of monetary tightening may be slower than had been assumed at the end of 2015.”

Thirty-year rates were 5 BPS better than in the same week last year.

Joe Farr, director at MBSQuoteline, reported that rates have improved since Freddie’s survey was conducted.

“The Freddie Mac survey was conducted before the nice rally that occurred following the FOMC statement on Wednesday,” Farr said in a written statement. “If the rate survey had been conducted this week on Thursday mortgage rates would have shown a small improvement.”

Fixed rates are poised to decline around 5 BPS in Freddie’s next survey, according to a Mortgage Daily analysis of Treasury market activity.

But Chief Financial Analyst Greg McBride disagrees with Mortgage Daily’s forecast and expects an increase in mortgage rates.

“Inflation has, to use the Fed’s words, ‘picked up,'” McBride wrote to Mortgage Daily. “Bond investors will eventually seize on to that — even though it hasn’t happened yet — so expect a little lift in mortgage rates.”

Also disagreeing with Mortgage Daily’s outlook for fixed rates were half of the panelists surveyed by for the week March 17 to March 23, who predicted an increase of at least 3 BPS over the next week or so. The other half were evenly split over whether rates would fall or stay where they’re at.

Fannie Mae predicted in its Housing Forecast: March 2016 that 30-year fixed rates will slip from 3.7 percent in the current quarter to 3.6 percent in the second quarter then spend the rest of the year at 3.7 percent.

Rates on jumbo mortgages were about the same as on conforming loans in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended March 11. In the previous report, jumbo rates were 8 BPS lower than conforming rates.

Freddie’s survey indicated that 15-year fixed rates averaged 2.99 percent, 3 BPS worse than in the week ended March 10, 2016. The spread between 15- and 30-year rates
widened to 74 BPS from 72 BPS in the last survey.

Ellie’s report indicated that 10.7 percent of all loans closed last month were 15-year mortgages, off from 11.1 percent in January.

At 2.93 percent in Freddie’s survey, five-year, Treasury-indexed, hybrid, adjustable-rate mortgages were up a basis points from a week earlier.

Hybrid ARMs are predicted by Fannie to average 2.9 percent during the first nine months of this year.

The one-year Treasury-indexed ARM averaged 2.63 percent as of Thursday, according to, tumbling from 2.81 percent the previous week. Freddie previously reported the one-year ARM at 2.46 percent in the year-earlier week.

The one-year Treasury note yield, which is utilized to determine rate changes on one-year ARMs, closed Thursday at 0.64 percent, the Department of the Treasury reported, down from 0.69 percent seven days earlier.

Also used to determine rate changes on some ARMs is the six-month London Interbank Offered Rate, which increased to 0.91 percent as of Wednesday from 0.90 percent one week previous, according to

ARMs accounted for 8.3 percent of all rate locks tracked in the most-recent Mortgage Market Index report. ARM share expanded from 6.7 percent a week previous.

ARM share was 5.1 percent in February, according to Ellie’s report, off from 5.3 percent the previous month.


Mortgage Daily Staff


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