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Mortgage rates rose to 4-year highs and are expected to continue higher.
The 30-year fixed-rate mortgage averaged 6.71%, up 8 basis points from a week ago to the highest level since May 31, 2002, according to Freddie Mac’s announcement Thursday of its latest survey of 125 mortgage-lending companies, thrifts and commercial banks. At this time last year, the average was 1.14% lower. “Financial markets believe that the current rate of inflation is above the Fed’s comfort zone, which will lead to more rate hikes in the near future,” commented Freddie Chief Economist Frank Nothaft in the announcement. “A rate hike in June is thought to be a sure thing, and what was believed to be a vaguely possible hike in August is now considered to be highly likely; that change in market expectations caused mortgage rates to jump higher this week.“ Forty-two of the 100 mortgage bankers, brokers and individuals Bankrate.com surveyed this week believe rates will keep rising in the next 30 to 45 days, and the rest were evenly split on whether rates will fall or remain relatively unchanged. Fannie Mae’s latest forecast does not see much change, as it has the 30-year averaging 6.69% next quarter and 6.72% by the end of the year. The 15-year jumped 11 BPS from last week to 6.36%, Freddie reported. The 10-year Treasury yield, a gauge for fixed mortgage rates, closed today at 5.21%, up 6 BPS for the day and 12 BPS from a week ago. Rising 9 BPS since last Thursday, the 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly averaged 6.32%. Freddie said the average for 1-year Treasury-indexed ARMs rose 9 BPS from last week to 5.75% — the highest level since August 3, 2001. This ARM’s index, the 1-year T-bill, rose 7 BPS week-to-week to 5.22% Wednesday, the Federal Reserve reported. Mortgage applications edged down from last week mainly due to a 2% decrease in refinance loan demand, the Mortgage Bankers Association said Wednesday. The refinance share of total applications remained at 36% while the ARM share slipped from last week to just below 30%. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com. e-mail: [email protected]