Interest rates on residential loans dipped again. But all indications are that fixed rates are likely to move significantly higher in the next report.
Fixed rates on 30-year loans averaged 3.93
percent in the week ended Dec. 3, according to Freddie Mac’s Primary Mortgage Market Survey.
Thirty-year rates were down from the previous report, when the average was 3.95 percent, and have been lower each of the past three weeks.
Freddie Mac Chief Economist Sean Becketti explained in the report that weak manufacturing data was behind the improvement. But he also highlighted how after Freddie’s survey had been conducted, Federal Reserve Board Chair Janet Yellen signaled a potential rate
hike later this month.
A year ago, long-term mortgage rates averaged 3.89 percent.
Mortgage rates have increased since the survey was conducted thanks to the small size of the European Central Bank stimulus, according to MBSQuoteline Director Joe Farr.
“For the week ended Thursday Dec. 3, mortgage rates actually rose about five basis points,”
Farr said in a written statement.
A Mortgage Daily analysis of Treasury market activity suggests that home loan rates could soar around 15 BPS in Freddie’s next survey.
Rates are predicted to rise at least three BPS over the next week based on 69 percent of the panelists surveyed by Bankrate.com for the week Dec. 3 to Dec. 9. Fewer than a third expected no change, and none projected a decline.
However, if tomorrow’s jobs report is weak — with fewer than 175,000 jobs added during November — the forecasted rate increase could be undermined.
Rates on jumbo mortgages were priced 22 BPS lower than on conforming loans in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Nov. 27. The jumbo-conforming spread widened from a negative 19 BPS the prior week
Freddie’s survey had 15-year fixed rates averaging 3.16 percent, two BPS less than in the week ended Nov. 25. Fifteen-year rates were
77 BPS less than 30-year rates. The spread was no different than seven days prior.
A two-basis-point decline from Freddie’s last report left five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaging 2.99 percent.
One-year ARMs averaged 2.61 percent, Freddie reported, up two BPS on a week over-week basis. One-year ARMs averaged 2.41 percent in the week ended Dec. 4, 2014.
Treasury Department data indicated that the yield on the one-year Treasury note, which is used as an index on one-year ARMs, closed Thursday at 0.57 percent,
climbing seven BPS from a week earlier.
Another, less-utilized ARM index — the six-month London Interbank Offered Rate — was 0.66 percent as of Wednesday, Bankrate.com reported. LIBOR rose from 0.63 percent one week prior.
ARM share was 9.3 percent in the latest Mortgage Market Index report, thinning from 12.3 percent the previous week. However, ARM share tends to increase with fixed rates.
