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Home Loan Interest Rates Hold Tight

Rates

Fixed interest rates on mortgages didn’t move much this past week, and the outlook is for more of the same. There was some movement, however, in adjustable rates.

At 3.96 percent in the week ended Dec. 24, average 30-year fixed rates on residential loans were just a basis point less than the previous week, Freddie Mac reported.

Home lending rates, which are collected weekly as part of Freddie’s Primary Mortgage Market Survey, moved higher, however, from 3.83 percent one year previous.

“As we mentioned last week, long-term interest rates will not spike in response to the Federal funds rate increase,” Freddie Mac Chief Economist Sean Becketti stated in the report. “While we expect the 30-year mortgage rate to be above 4 percent in early 2016, we anticipate rates will gradually increase, averaging 4.4 percent for the year.”

More specifically, Freddie predicted in its
December 2015 Economic and Housing Market Outlook that 30-year rates will average 3.9 percent this quarter then rise 20 BPS each quarter next year.

Economists at the Mortgage Bankers Association predicted in December’s MBA Mortgage Finance Forecast that long-term mortgage rates will average 3.9 percent in the fourth-quarter 2015, then increase to 4.2 percent in the first quarter of next year. Each subsequent quarter in 2016 is expected to see a 20-basis-point increase.

In next week’s report from Freddie, fixed rates are likely to be about the same as they were in this week’s report, according to Mortgage Daily’s analysis of Treasury market activity.

Sixty percent of panelists polled by Bankrate.com for the week Dec. 23 to Dec. 30 agreed with Mortgage Daily’s prediction that rates won’t move much over the next week, though 40 percent projected rates will increase at least three BPS. None of the panelists expected rates to decline.

Interest rates on jumbo mortgages were 19 BPS less than rates on conforming loans, according to the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Dec. 18. The jumbo-conforming spread widened from a negative 16 BPS in the previous report.

Freddie reported 15-year fixed rates averaged 3.22 percent, the same as in the week ended Dec. 17. Fifteen-year mortgage rates were
74 BPS less than 30-year rates, thinning from a spread of 75 BPS in the last report.

A three-basis-point week-over-week rise was recorded by Freddie
for five-year, Treasury-indexed, hybrid, adjustable-rate mortgages, which averaged 3.06 percent.

Freddie predicts that hybrid ARMs
will average 3.0 percent this quarter, 3.2 percent in the first-quarter 2016 and 3.4 percent three months later.

Interest rates on one-year Treasury-indexed ARMs inched up a basis point from the prior report to 2.68 percent, according to Freddie’s survey. One-year ARMs averaged 2.39 percent in the week ended Dec. 25, 2014.

The index for one-year ARMs, the yield on one-year Treasury notes, closed Wednesday at 0.65 percent, the Treasury Department reported. That was lower than 0.70 percent as of seven days earlier.

Bankrate.com reported that another ARM index, the six-month London Interbank Offered Rate — or LIBOR — rose to 0.81 percent as of Wednesday from 0.76 percent a week prior.

ARM share was 9.8 percent in the latest Mortgage Market Index report, thinning from 13.5 percent one week earlier.

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