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Falling Mortgage Rates Could Bounce Back Up

Rates

Interest rates on residential loans moved lower this past week. But it’s possible that fixed rates could bounce right back up in the next report.

At 4.04 percent for the week ended July 9, thirty-year fixed rates were four basis points less than they were one week prior.

The data, outlined in Freddie Mac’s Primary Mortgage Market Survey, indicated that the 30 year averaged 4.15 percent in the same week last year.

Events in China and Greece were behind the drop in rates, according to Freddie Mac Chief Economist
Sean Becketti.

“Overseas volatility is likely to persist for some time, providing some restraint on potential U.S. rate increases,” Becketti stated in the report. “In addition, the minutes of the June meeting of the Federal Open Market Committee suggest the Federal Reserve will proceed cautiously — monitoring events both overseas and in the U.S. to ascertain the appropriate moment to begin raising short-term interest rates.

“As a result, mortgage rates may remain in the neighborhood of 4 percent for a while.”

But a Treasury market analysis by Mortgage Daily indicates that fixed rates could be around six BPS worse in the next report. Bond yields rose Thursday as markets in China recovered but remained volatile.

Half of panelists surveyed by Bankrate.com for the week July 9 to July 15 predicted mortgage rates will decline at least three BPS over the next week. No change was forecasted by 42 percent, and just eight percent predicted an increase.

Borrowers on jumbo mortgages were locked in at interest rates that were 13 BPS less than on conforming loans, according to the U.S. Mortgage Market Index from OpenClose and Mortgage Daily for the week ended July 3. The jumbo-conforming spread widened from a negative seven BPS one week prior.

Freddie reported 15-year fixed rates at 3.20 percent, four BPS better than in the previous report. The spread between 15- and 30-year rates was unchanged from seven days earlier at 84 BPS.

Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged
2.93 percent in the latest survey from Freddie, six BPS less than in the previous report.

One-year ARMs averaged 2.50 in Freddie’s report,
retreating two BPS from a week earlier but 10 BPS worse than the week ended July 10, 2014.

Borrowers who have a one-year ARM see their rates and payments adjust based on movement in the one-year Treasury yield, which closed Thursday at 0.25 percent, according to data from the Department of the Treasury, down from 0.26 percent seven days prior.

With no change from a week previous, the six-month London Interbank Offered Rate was 0.44 percent as of Wednesday, according to Bankrate.com.

The latest Mortgage Market Index report had ARM share at 11.3 percent, fatter than 8.5 percent in the report for the week ended June 26.

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