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As application activity ticked up following last week’s drop in interest rates, mortgage rates jumped following the release of some positive economic news and may be headed higher.
For the first time in seven weeks, the 30-year fixed-rate mortgage average increased — by 15 basis points from last week to 6.11%, according to Freddie Mac’s Primary Mortgage Market Survey for the week ending today. At this time last year, the average was 6.12%.
The 15-year fixed-rate mortgage averaged 5.78%, 13 BPS higher than a week earlier, Freddie reported. In afternoon trading, the 10-year Treasury note yield was reported at 4.17% –17 BPS worse than a week ago. “November’s employment report showed stronger job growth, no change in the unemployment rate and a jump in wages, suggesting to some market participants that the probability of an upcoming recession might be lower than originally thought,” Frank Nothaft, Freddie chief economist, said in an announcement. “This led to a rise in interest rates for U.S. Treasury securities this week and mortgage rates followed.” But, on Wednesday, the Federal Open Market Committee announced it lowered its target for the federal funds rate by 25 BPS to 4.25%, citing that it “judges that some inflation risks remain.” “Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending,” the committee said in the announcement. “Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.” Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. This week, 64 of the 100 panelists surveyed by Bankrate.com believe mortgage rates will rise through the end of January, and the rest were evenly split among those who think rates will fall and those who see them remaining relatively unchanged. Climbing 14 BPS from a week ago, the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.89%. The 6-month London Interbank Offered Rate averaged 4.96% this week, rising 5 BPS in a seven-day period, Bankrate.com reported. The 1-year Treasury-indexed ARM average also rose, though at a slower pace of 4 BPS to 5.50% this week, Freddie said. Meanwhile, the yield on the 1-year Treasury bill, at 3.09% Tuesday, ticked down 2 BPS from a week earlier, Federal Reserve data showed. The share of applications that were for ARMs continued to fall, to about 9% from nearly 12% a week earlier, according to the Mortgage Bankers Association’s applications survey for the week ending Dec. 7. Total mortgage application volume improved 3 percent from the prior week, reflecting a 4% upturn in refinance requests and a 2% increase in purchase money application activity, MBA reported. The increase was fueled a 14 BPS decline last week in the average 30-year fixed rate. The refinance share of mortgage activity reportedly edged up to 58% from 56% the previous week. |