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Mortgage Rates Jump, Volatile Week Ahead

Rates

Mortgage rates soared to the highest level in nearly five months. While current signs point to no changes in the week ahead, tomorrow’s jobs report could change that.

Thirty-year fixed interest rates on residential loans averaged 3.54 percent in the week ended Nov. 3, Freddie Mac reported in its Primary Mortgage Market Survey.

That turned out to be the highest level for 30-year mortgage rates since the week ended
June 23, when the average came in at 3.56 percent, based on historical data.

The 30 year was up from 3.47 percent the prior week but still better than 3.87 percent a year prior.

“A jump last week in the PCE — the price index tracked most closely by the Fed — raised the prospect that inflation might not be completely dead after all,” Freddie Mac Chief Economist Sean Becketti explained in the report. “Investors reacted by driving the yield on the 10-year Treasury to its highest point since June.”

MBSQuoteline Director Joe Farr told Mortgage Daily in a written statement that prices on mortgage-backed securities have changed little since the PMMS was conducted — an indication that mortgage rates have also moved little.

A Mortgage Daily analysis of this week’s Treasury market activity suggests that fixed mortgage rates are not likely to be much different in next week’s survey from Freddie.

However, if Friday’s employment report from the Department of Labor indicates that substantially more than 200,000 jobs were added in October, then mortgage rates could move higher. On the other hand, if substantially fewer than 175,000 jobs were added, rates could decline.

Sixty percent of the panelists surveyed by Bankrate.com for the week Nov. 3 to Nov. 10 agreed with Mortgage Daily’s forecast that rates will stay put. The remaining 40 percent were evenly split over whether rates would rise at least 3 basis points or fall.

Interest rates on jumbo mortgages were
7 BPS more than conforming rates in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Oct. 28. The prior week, the jumbo-conforming spread was thinner at 0.01 percent.

Freddie’s most-recent survey indicated that 15-year fixed rates averaged 2.84 percent, climbing from 2.78 percent in the week ended Oct. 27. The spread between 15- and 30-year rates widened to 70 BPS from 69 BPS in the last report.

Average rates on five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.87 percent in Freddie’s report, 3 BPS higher than the prior survey.

At 2.84 percent as of Thursday, the one-year Treasury-indexed ARM
was slightly less than 2.85 percent as of seven days previous, according to HSH.com. Freddie previously reported that one-year ARMs averaged 2.62 percent in the week ended Nov. 5, 2015.

The yield on the one-year Treasury note, which determines rate changes for the one-year ARM, closed Thursday at 0.64 percent, less than 0.68 percent the prior Thursday, according to data published by the Department of the Treasury.

The weekly average six-month London Interbank Offered Rate was 1.26 percent as of Wednesday, Bankrate.com reported. LIBOR, which is utilized as an index on a small share of ARMs, was no different than a week earlier.

ARM share was 7.2 percent in the latest Mortgage Market Index report, wider than 5.8 percent the previous week.

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