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Mortgage Rates Slip, Unlikely to Move Much

Rates

Fixed mortgage rates dipped below 4 percent and aren’t likely to move much by the next report. Longer term, however, the outlook is for an increase.

A 2-basis-point improvement over last week left 30-year fixed rates averaging 3.99 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Nov. 21.

The decline was even more significant compared to the same week last year, with a 23-basis-point decline reported on a year-over-year basis.

“Fixed mortgage rates were slightly down as housing starts declined 2.8 percent in October below the upwardly revised September rate,” Freddie Mac Chief Economist Frank Nothaft explained in the report. “However, building permits increased 4.8 percent in October after a 2.8 percent boost a month earlier. Lastly, industrial production slipped by 0.1 percent in October, below the market consensus forecast.”

Ellie Mae Inc. reported in its Origination Insight Report October 2014 that average 30-year fixed rates slipped to 4.371 percent last month from 4.381 percent in September.

In next week’s survey from Freddie, fixed rates aren’t likely to much different, according to an analysis of Treasury market activity.

Data from the Department of the Treasury indicate that the yield on the 10-year Treasury note — a benchmark for fixed mortgage rates — averaged 2.34 percent during the period covered by Freddie’s survey, while it closed Thursday at 2.34 percent.

An overwhelming majority of panelists surveyed by Bankrate.com for the week Nov. 20 to Nov. 26 agreed with Mortgage Daily’s forecast and predicted that rates won’t move more than 2 BPS during the next week. An increase was forecasted by 31 percent, and none expected a decline.

Freddie’s November 2014 U.S. Economic & Housing Market Outlook has 30-year fixed rates averaging 4.0 percent during the current quarter then rising to 4.2 percent in the first-quarter 2015 and 4.5 percent during the following three-month period.

Federal Reserve Bank of Cleveland Vice President LaVaughn Henry told a Kentucky State University audience Tuesday that interest rates could be 1 percent higher by this time next year, the Lexington Herald-Leader reported.

Interest rates on jumbo mortgages were 9 BPS higher than on conforming loans in the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Nov. 7. The jumbo-conforming spread slipped from 10 BPS the previous week.

Three BPS were trimmed off of 15-year fixed rates from the week ended Nov. 13, leaving the 15 year averaging 3.17 percent in Freddie’s latest survey. The spread between 15- and 30-year mortgages widened to 82 BPS in the latest report from 81 BPS a week earlier.

Fifteen-year mortgages accounted for 9.6 percent of October production in Ellie’s report, up from 9.1 percent in September.

Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 3.01 percent, 1 basis point better than in the previous report.

Freddie forecasts that hybrid ARM rates will go from 3.0 percent in the fourth quarter to 3.2 percent in the first three months of next year and 3.4 percent in the second-quarter 2015.

One-year Treasury-indexed ARMs averaged 2.44 percent in Freddie’s survey, a basis point higher than last week but 17 BPS better than the week ended Nov. 21, 2013.

One-year ARMs are forecasted by Freddie to be 2.5 percent during the final three months of 2014 and the first three months of 2015 then rise to 2.6 percent in the second quarter of next year.

The yield on the one-year Treasury note, which sets the one-year ARM rate, slipped to 0.14 percent Thursday from 0.15 percent seven days prior, according to the Treasury Department data.

The six-month London Interbank Offered Rate, which is used as an index on some subprime ARMs, was 0.33 percent as of Wednesday, Bankrate.com reported, the same as a week earlier.

Ellie reported that ARM share was 6.3 percent in October, the same as a month earlier.

In the latest weekly Mortgage Market Index report, ARM share was 10.9 percent, narrowing from 11.3 percent one week prior.

Freddie’s forecast has ARM share going from 11 percent in the fourth quarter to 12 percent three months later and 13 percent in the second-quarter 2015.

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