Mortgage Rates Fall But Likely to Jump

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3 · 26 · 15

Following two consecutive weeks of improvement, fixed rates on home loans are poised to turn higher in the next report.

In Freddie Mac’s Primary Mortgage Market Survey for the week ended March 26, thirty-year fixed rates averaged 3.69 percent.

That was a nine-basis-point decline over
last week’s survey and the second week in a row that fixed rates improved. The average was 71 BPS better than in the same week last year.

On conventional, conforming loans, 30-year fixed rates averaged 3.91 percent in February, off from 4.06 percent in January, according to the Federal Housing Finance Agency.

Fixed rates, however, are likely to be
approximately 10 BPS worse in Freddie’s next survey, based on Mortgage Daily’s analysis of Treasury market activity.

But that’s not the way panelists surveyed by for the week March 26 to April 1 see it. No change was predicted by 55 percent, a decline of at least 3 BPS was projected by 45 percent, and none expected an increase.

Joe Farr,
a director at MBSQuoteline, noted the dynamics have changed since Freddie conducted its survey.

“Due to MBS prices falling over the last couple of days, the Freddie Mac report that rates have fallen by 8 basis point is a little misleading,” Farr explained in a statement. “Rates as of today are actually a little higher than they were last Thursday.”

In its Housing Forecast: March 2015, Fannie Mae predicted that long-term fixed rates will average 3.7 percent in the first quarter then rise 10 BPS each of the following four quarters.

The Mortgage Bankers Association was a little less optimistic about 30-year fixed rates, projecting in its
MBA Mortgage Finance Forecast for March that 30-year rates will average 3.7 percent this quarter, 4.0 percent in the second quarter and 4.4 percent in the following three-month period.

The difference between interest rates on conforming loans and jumbo
mortgages was seven BPS in the U.S. Mortgage Market Index report from LoanSifter-Optimal Blue and Mortgage Daily for the week ended March 20. The jumbo-conforming spread thinned from 10 BPS in the previous report.

Freddie reported that 15-year fixed rates averaged 2.97 percent, 9 BPS better than in the week ended March 19.
There was no change from the last report in the spread between 15- and 30-year mortgages, which was 72 BPS.

Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.92 percent in Freddie’s survey, off 5 BPS for the week.

Fannie has hybrid ARMS averaging 3.0 percent this quarter then increasing 10 BPS each quarter through the end of next year.

Freddie said average one-year Treasury-indexed ARMs were 2.46 percent, the same as a week earlier and 2 BPS worse than the week ended March 27, 2014.

One-year ARMs are projected by Fannie to climb from 2.4 percent in the first quarter to 2.6 percent three months later and 2.7 percent in the third quarter.

The bad news for one-year ARM borrowers is that their rates are likely to increase the next time they adjust based on the one-year Treasury yield, which climbed to 0.28 percent Thursday from 0.26 percent seven days earlier, according to Treasury Department data. The one-year Treasury yield has more than doubled compared to a year previous, when it was just 0.12 percent.

But the six-month London Interbank Offered Rate was down 1 basis point from a week earlier to 0.39 percent Wednesday, reported.

The latest
Mortgage Market Index report indicates that ARM share increased to 9.4 percent from 9.1 percent in the week ended March 13.

ARMs are predicted by Fannie to account for 7 percent of originations in the first three months of this year. ARM share is then projected to be 8 percent for the remainder of this year and all of next year.


Mortgage Daily Staff


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