Mortgage Rates Soar, Likely to Hold

Interest rates on home loans leapt on a strong jobs report, and it’s not looking like they’ll be much different in next week’s report. Fifteen-year rates looked more attractive, while hybrid adjustable-rates skyrocketed.

Secondary lender Freddie Mac
reported in its Primary Mortgage Market Survey for the week ended Feb. 12 that 30-year fixed rates averaged 3.69 percent.

Compared to the previous week, long-term mortgage rates were 10 basis points higher. The 30- year, however, was down 59 BPS from the same week last year.

A strong employment report was to blame for the jump in interest rates, according to Freddie Mac Deputy Chief Economist Len Kiefer.

Fixed rates aren’t likely to be much different in next week’s survey from Freddie based on Mortgage Daily’s analysis of Treasury market activity.

But a majority of panelists surveyed by Bankrate.com for the week Feb. 12 to Feb. 18 predicted that mortgage rates will increase at least 3 BPS over the next week. A quarter forecasted no change, and just 17 percent expected a decline.

In the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Feb. 6, interest rates on jumbo loans were 17 BPS higher than conforming rates. The jumbo-conforming spread diminished from 20 BPS a week earlier.

At 2.99 percent, 15-year fixed rates worsened by 7 BPS from Freddie’s survey for the week ended Feb. 5. Fifteen-year loans were priced 70 BPS less than 30-year loans. The spread fattened from 67 BPS in the previous report.

Five-year, Treasury-indexed, hybrid,
adjustable-rate mortgages averaged 2.97 percent in Freddie’s most-recent report, rising a stunning 15 BPS from the last survey.

A modest 3-basis-point week-over-week increase in one-year ARMs left the average at 2.42 percent
in Freddie survey. The one-year ARM averaged 2.55 percent in the week ended Feb. 13, 2014.

One-year ARMs adjust based movement in the one-year Treasury yield, which closed Thursday at 0.23 percent, according to data from the Department of the Treasury. The one-year yield moved up from 0.20 percent seven days earlier.

An index used on some subprime ARMs, the six-month London Interbank Offered Rate,
climbed to 0.38 percent Wednesday from 0.36 percent in the prior report, according to Bankrate.com.

The latest Mortgage Market Index report had ARM share at 8.7 percent, off from the previous week’s 8.9 percent.