With no signs that the Federal Reserve will change its plans to reduce its purchases of agency mortgage-backed securities, interest rates on home loans drifted higher and could continue rising.
Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Feb. 20 that 30-year fixed rates averaged 4.33 percent.
Long-term mortgage rates moved up from last week, when the average was 4.28 percent. But 30-year rates were nowhere near their 3.56 percent average a year ago.
In assessing weekly rate activity, Frank Nothaft, Freddie’s chief economist, cited the Federal Reserve statement suggesting that the central bank has no intention of tapering its bond purchases.
Ellie Mae reported that 30-year rates averaged 4.723 percent on closed loans during January, rising from 4.592 percent the prior month and 3.634 percent in January 2013.
Thirty-year mortgage rates appear to be poised for a slight increase by the time Freddie releases the results of its next survey, according to an analysis of Treasury market activity.
Data from the Treasury Department indicate that the yield on the 10-year Treasury note — a benchmark for long-term fixed rates — averaged 2.73 percent during the period that Freddie surveyed lenders for the latest report. The 10-year yield closed at 2.76 percent Friday.
But all of the panelists surveyed by Bankrate.com for the week Feb. 20 to Feb. 26 disagreed with Mortgage Daily’s forecast. Half predicted rates will fall at least 3 BPS during the next week, while the other half expected no changes ahead.
Freddie predicts that 30-year rates will average 4.4 percent this quarter, 4.5 percent in the second quarter and 4.7 percent in the following quarter.
Over at the Mortgage Bankers Association, 30-year rates are expected to average 4.5 percent during the first quarter, then increase to 4.7 percent during the following three-month period and 4.9 percent in third quarter
Interest rates on jumbo mortgages were just 5 BPS more than on conforming loans in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended Feb. 14. The jumbo-conforming spread sank from 12Â BPS in the previous report and plunged from 28 BPS in the year-earlier report.
Like 30-year rates, 15-year fixed rates also increased, rising to 3.35 percent in Freddie’s report from 3.33 percent in the week ended Feb. 13. Fifteen-year mortgages became more attractive versus their 30-year counterparts, with the spread widening to 98 basis points from 95 BPS in the previous report.
At 3.08 percent, five-year, Treasury-indexed, hybrid, adjustable-rate mortgages was 3 BPS higher than in Freddie’s last report.
Freddie expects hybrid ARMs to average 3.1 percent in the first half of 2014 and 3.3 percent in the third quarter.
Also climbing from last week were one-year Treasury-indexed ARMs, which Freddie said averaged 2.57 percent. The one year averaged 2.55 percent seven days earlier and 2.65 percent in the week ended Feb. 21, 2013.
Freddie’s projection is for one-year ARMs to average 2.6 percent during the first nine months of this year.
Rates and payments on one-year ARMs adjust with the yield on the one-year Treasury note, which the Treasury Department reported at 0.12 percent as of Thursday, the same as seven days prior.
Another ARM index, the six-month London Interbank Offered Rate, was 0.33 percent Wednesday, the same as one week earlier, according to Bankrate.com. LIBOR hasn’t moved since Jan. 22.
ARM share inched up to 12.9 percent in the latest Mortgage Market Index report from 12.7 percent in the previous report.
ARMs accounted for 7.2 percent of all closed loans in January, according to Ellie Mae. ARM share was 6.6 percent a month earlier and 2.1 percent a year earlier.
Freddie has ARM share at 10 percent during the first quarter then rising 1 percentage point each quarter until mid-2015.
