Rates surged this past week on good economic news. But activity in the Treasury market suggests they might be lower in the next report.
A 16-basis-point jump from last week left the average 30-year fixed-rate mortgage at 4.08 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended March 22. The 30 year was 4.81 percent in the week ended March 24, 2011.
“Bond yields rose over the past two weeks in part due to an improving assessment of the state of the economy by the Federal Reserve, better than expected results of commercial bank stress tests and the likelihood of a second bailout for Greece,” Freddie’s chief economist, Frank Nothaft, explained in the weekly survey.
But bond yields have since retreated, pointing to a roughly 7-basis-point decline in next week’s report. During the days when Freddie was surveying its 125 lenders, the 10-year yield averaged 2.36 percent, according to figures reported by the Department of the Treasury. But the 10-year yield closed at just 2.29 percent today.
Panelists surveyed by Bankrate.com for the week March 22 to March 28 offered no clear direction about where rates are headed. An increase of at least 3 BPS was forecasted by 38 percent, while 31 percent predicted a decline and another 31 percent saw no changes ahead.
Fannie Mae forecasted that the 30 year will inch up to 4.0 percent in the second quarter from 3.9 percent in the first quarter then spend the second half of the year at 4.1 percent.
The Mortgage Bankers Association was less optimistic in its outlook, with the 30-year predicted to climb from 4.0 percent during the first three months of this year to 4.3 percent in the second quarter. MBAÂ sees the 30 year rising each quarter until the end of next year, when it is expected to reach 5 percent.
Borrowers inquiring about a jumbo loan were quoted a rate that was 60 BPS worse than conforming loans, according to the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended March 16. The jumbo-conforming spread widened from 59 BPS in the prior report.
Freddie reported that the average 15-year mortgage climbed to 3.30 percent from 3.16 percent a week earlier. Fifteen-year loans were discounted by 78 BPS over 30-year mortgages, better than the 76-basis-point spread in the previous report.
At 2.96 percent, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 13 BPS more than last week, according to Freddie.
Just a 5-basis-point increase was reported by Freddie for the one-year Treasury-indexed ARM, which averaged 2.84 percent. The one-year ARM was 3.21 percent this same week last year.
Fannie expects the one-year to average 2.9 percent during the second quarter compared to 2.8 percent in the first quarter. During the final six months of 2012, the one-year is expected to be 3.0 percent.
One-year ARM borrowers saw their index fall to 0.19 percent today from 0.21 percent a week earlier, Treasury Department data indicate.
There was no change this week for the six-month London Interbank Offered Rate, which Bankrate.com reported at 0.74 percent as of Wednesday.
The share of shoppers who inquired about an ARM in the Mortgage Market Index report rose to 4.67 percent from 4.39 percent a week prior.
ARM share of loan applications is expected by Fannie to be 6 percent during the first nine months of this year then fall to 5 percent for the following six months.
MBA’s expectations are that ARM share of loan originations will climb to 5 percent in the second quarter from 4 percent this quarter then rise to 6 percent in the following three quarters.
