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Rates Up But Could Fall Unless Strong Jobs Report

Rates

Interest rates on home loans increased but could retreat unless the upcoming employment report comes in with strong numbers.

Freddie Mac’s Primary Mortgage Market Survey had 30-year fixed rates averaging 3.66 percent in the week ended June 2.

Long-term residential loan rates
were elevated from the previous seven-day period, when the average landed at 3.64 percent.

But an improvement has been made from the same week in 2015, when 30-year fixed rates were 3.87 percent.

“Recent statements by the Fed appear to have persuaded the market that a rate hike may come sooner than later,” Freddie Mac Chief Economist Sean Becketti explained in the report. “However, the market is fickle, and Friday’s employment report has the potential to swing opinion 180 degrees in the other direction.”

Joe Farr, director at MBSQuoteline, wrote to Mortgage Daily that prices on mortgage-backed securities have improved somewhat since Freddie’s survey was conducted, an indication that interest rates on home loans have also improved.

Mortgage Daily’s
analysis of Treasury market activity indicates that mortgage rates could be in the neighborhood of 4 BPS better in the next survey.

But tomorrow’s release of the government employment report could push rates higher if it is better than expected, according to Bankrate.com Chief Financial Analyst Greg McBride.

“A solid jobs report will cement the idea of a summer rate hike, pushing mortgage rates up a bit,” McBride said in a written statement to Mortgage Daily.

Forty-two percent of panelists surveyed by Bankrate.com for the week June 2 to June 8 agreed with McBride and predicted rates will rise at least 3 BPS over the next week. However, an equal share expected no change in rates, while just 16 percent forecasted a decline.

In the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the
week ended May 27, interest rates on jumbo mortgages were 11 BPS higher than conforming rates. The jumbo-conforming spread widened from 9 BPS the previous week.

Fifteen-year mortgage rates averaged 2.92 percent in Freddie’s most-recent report, 3 BPS higher than in the week ended May 26, 2016.
Freddie’s survey indicates that 15-year rates were 74 BPS better than 30-year rates, a slightly slimmer spread than 75 BPS in the prior report.

Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.88 percent, a basis point more than a week earlier.

HSH.com reported that one-year Treasury-indexed ARMs were 2.60 percent as of Thursday, falling from 2.84 percent seven days prior. Freddie previously reported one-year ARM rates averaged 2.59 percent in the week ended June 4, 2015.

Rate adjustments on one-year ARMs are determined based on changes in the one-year Treasury note yield, which was 0.68 percent as of Thursday, according to Treasury Department data. The one-year yield climbed 3 BPS over the past week.

The six-month London Interbank Offered Rate was 0.98 percent as of Wednesday, according to Bankrate.com. LIBOR continued to rise from 0.96 percent one week prior.

ARMs accounted for 11.5 percent of all activity in the most-recent Mortgage Market Index report. ARM share widened from 9.2 percent seven days previous.

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