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16-Month High for Rates, Further Spike Likely

Rates

It’s been nearly a year-and-a-half since fixed mortgage rates have been as high as they are now, and the outlook is for another sharp increase.

In October,
the average interest rate on conventional purchase-money mortgages with conforming loan amounts came in at 3.76 percent.

The Federal Housing Finance Agency, which reported the metric on Tuesday, said the average was up 3 basis points from the prior month.

During just the week ended Dec. 1, thirty-year fixed rates averaged
4.08 percent in Freddie Mac’s Primary Mortgage Market Survey — the highest level since they were 4.09 percent in the week ended July 16, 2015.

Long-term rates averaged 4.03 percent in Freddie’s prior survey and 3.93 percent in the week ended Dec. 3, 2015.

Joe Farr, director at MBSQuoteline, said in a written statement to Mortgage Daily that rates have worsened since Freddie conducted its survey.

“Rates improved early in the week on uncertainty regarding a referendum in Italy and then rose on news that OPEC had reached a deal to cut oil production,” Farr explained. “The improvement was picked up in the Freddie Mac survey, but the rise was not.”

A Mortgage Daily analysis of Treasury market activity indicates that fixed mortgage rates could be around 12 BPS worse in next week’s survey.

Half of the panelists surveyed by Bankrate.com for the week Dec. 1 to Dec. 7 expected rates to rise at least 3 BPS over the next week. No change was predicted by 30 percent, and just a fifth projected a decline.

But a weak employment report from the Labor Department tomorrow could put downward pressure on interest rates.

Freddie predicted in its
November 2016 Economic & Housing Market Forecast that 30-year fixed rates will climb from 3.8 percent in the fourth-quarter 2016 to 4.0 percent in the first three months of next year and 4.1 percent in the second quarter.

Jumbo interest rates averaged 7 BPS less than conforming rates in the U.S. Mortgage Market Index report from Mortgage Daily and Open Close for the week ended Nov. 25. The jumbo-conforming spread was little changed from the prior week.

Freddie reported that 15-year fixed rates averaged
3.34 percent, climbing from 3.25 percent in the week ended Nov. 23. Fifteen year-rates were 74 BPS lower than 30-year rates, a more narrow spread than 78 BPS the prior week.

Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 3.15 percent in Freddie’s survey, just 3 BPS more than in the last report.

Freddie expects hybrid ARM rates to go from 3.1 percent in the current quarter to 3.3 percent in the first-quarter 2017 and 3.4 percent three months later.

The National Association of Federal Credit Unions predicted in its NAFCU Economic & CU Monitor: Forecast November 2016 that 30-year mortgage rates will average 3.8 percent next year, up from 3.6 percent in 2016.

Treasury Department data indicate that the yield on the one-year Treasury note was 0.82 percent as of Thursday, up from 0.80 percent a week ago.

The six-month London Interbank Offered Rate was reported by Bankrate.com at 1.29 percent as of Wednesday. LIBOR rose from 1.27 percent seven days earlier.

ARM share thinned to
9.9 percent in the latest Mortgage Market Index report from 10.5 percent the previous week.

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