Interest rates on residential loans have been up each of the past four weeks but could be significantly lower in next week’s report. The one-year adjustable-rate mortgage fell just shy of its all-time low.
A 4-basis-point increase from last week left the average 30-year fixed-rate mortgage at 3.66 percent, Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Aug. 23. During the same week last year, the 30 year averaged 4.22 percent.
The 30 year has increased each week since July 19, when it stood at 3.53 percent.
Freddie Mac Chief Economist Frank Nothaft explained that positive housing market news placed upward pressure on rates.
“The Census Bureau reported that residential building permits were up in July, although builders slowed the pace of construction starts on one-family homes in July to the least since March while apartment and condominium building picked up to the most since April,” Nothaft said in the report. “Existing home sales rose in July from June’s eight-month low and the median sales price jumped 9.4 percent from a year earlier, representing the largest 12-month gain since January 2006.”
So far, Treasury market activity points to a decline in fixed rates by the time Freddie’s next survey rolls around. The yield on the 10-year Treasury note averaged 1.78 percent during the three days that Freddie surveyed lenders for this week’s survey, while the 10-year yield closed at 1.68 percent Thursday, according to data reported by the Department of the Treasury. The movement suggests a 10-basis-point decline in next week’s survey.
But a majority of panelists surveyed by Bankrate.com for the week Aug. 23 to Aug. 29 predicted that rates won’t move more than 2 BPS during the next seven days or so, while 42 percent expected a decline. None forecasted a rise.
In its monthly economic forecast, Fannie Mae predicted that the 30-year mortgage will average 3.6 percent in the second of this year and the first half of next year. The Mortgage Bankers Association, however, has the 30 year at 3.7 percent this quarter and rising every three months to settle at 4.4 percent in the final quarter of 2013.
Jumbo mortgages became much cheaper relative to their conforming counterparts. In the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily for the week ended Aug. 17, the jumbo-conforming spread sank to 62 BPS from 72 BPS one week earlier.
Freddie reported that the 15-year fixed-rate mortgage averaged 2.89 percent, inching up from 2.88 percent in the survey for the week ended Aug. 16. The difference between a 15-year and a 30-year mortgage widened to 77 BPS from the 74-basis-point spread in the prior report.
The five-year Treasury-indexed ARM averaged 2.80 percent in Freddie’s survey, up from 2.76 percent seven days earlier.
But the one-year Treasury-indexed ARM averaged 2.66 percent, a single basis point above its all-time low and 3 BPS better than a week ago. The one year averaged 2.93 percent in the week ended Aug. 25, 2011.
Fannie forecasts that the one-year will average 2.7 percent in the second-half 2012 and all of next year.
Not much movement was detected in the one-year ARM index — the yield on the one-year Treasury note — which the Treasury Department reported at 0.19 percent today versus 0.20 percent a week earlier.
No movement was reported by Bankrate.com over the previous week for the six-month London Interbank Offered Rate, which was 0.72 percent Wednesday.
ARM share barely widened to 3.2 percent in the latest Mortgage Market Index report from 2.8 percent a week prior.
Fannie projects that ARM share will be 6 percent in the final two quarters of this year, while it will be 7 percent in the first two quarters of 2013. MBA agrees with Fannie’s second-half 2012 outlook and also sees the one year at 6 percent in the first quarter of next year.
