Mortgage Rates Spike But Could Retreat

New residential loans that were closed during the month of February 2017 had an average 30-year note rate of 4.36 percent.

The average rate moved higher from 4.31 percent the previous month. It was also increased from 4.22 percent a year previous.

The rates were derived from the February 2017 Origination Insight Report from Ellie Mae Inc.

Last month’s average rate on
conventional loans was 4.48 percent. The average on mortgages insured by the Federal Housing Administration was 4.28 percent, while it came it at 4.08 percent on loans guaranteed by the Department of Veterans Affairs.

Freddie Mac reported in its Primary Mortgage Market Survey for the week ended March 16 that 30-year fixed rates averaged 4.30 percent — the highest level for the 30 year since it was 4.32 percent in the week ended Dec. 29, 2016. Thirty-year rates surged from 4.21 percent last week. In the same week last year, the average was 3.73 percent.

“As expected, the FOMC announced its first rate hike of 2017 and hinted at additional increases throughout the remainder of the year,” Freddie Mac Chief Economist Sean Becketti said in the report. “Although our survey was conducted prior to the Fed’s decision, the release of the February jobs report all but guaranteed a rate hike and boosted the 30-year mortgage rate 9 basis points to 4.30 percent this week. Increasing inflation, continued gains in the labor market and the Fed’s intentions for further rate increases — all three will keep pushing mortgage rates up this year.”

Bankrate.com Chief Financial Analyst Greg McBride said in a written statement that mortgage rates have long reflected the Fed’s expected hike in interest rates.

Joe Farr, director at MBSQuoteline, noted in a written statement to Mortgage Daily that prices on mortgage-backed securities improved after the Fed’s statement. He said mortgage rates have fallen since Freddie’s survey was conducted.

A Mortgage Daily analysis of Treasury market activity points to fixed mortgage rates that are around 5 BPS lower in Freddie’s next survey.

But none of the panelists surveyed by Bankrate.com for the week March 9 to March 15 expected rates to decline over the next week. Ninety percent predicted rates will rise at least 3 BPS, and 10 percent forecasted no change.

Fannie Mae predicted in its Housing Forecast: March 2017 that 30-year fixed rates will average 4.1 percent this quarter and 4.2 percent each of the remaining quarters of this year.

In the Mortgage Bankers Association’s MBA Mortgage Finance Forecast, 30-year fixed rates are expected to average 4.2 percent in the first quarter, 4.4 percent three months later and 4.6 percent in the third quarter.

Jumbo rates were a basis point less than conforming rates in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended March 10. The jumbo-conforming spread was unchanged from a week earlier.

Fifteen-year fixed rates were 3.50 percent in Freddie’s survey, climbing from 3.42 percent in the week ended March 9. The spread between 15- and 30-year rates
was 80 BPS, wider than 79 BPS the previous week.

At 3.28 percent in Freddie’s latest report, five-year, Treasury-indexed, hybrid, adjustable-rate mortgages were 5 BPS worse than one week prior.

In Fannie’s forecast, hybrid ARMs are expected to average 3.2 percent in the first quarter then rise 10 BPS each of the remaining quarters of this year.

Hybrid ARMs adjust based on the one-year Treasury yield, which was reported by the Department of the Treasury at 1.01 percent as of today, off from 1.04 percent the prior Thursday.

Bankrate.com reported that the six-month London Interbank Offered Rate was 1.43 percent as of Wednesday, inching up from 1.42 percent seven days earlier.

During February, Ellie reported that ARM share was 5.3 percent, thinner than 5.4 percent a month earlier but wider than 5.1 percent a year earlier.

Conventional ARM share was 6.3 percent in February 2017, while the share was 0.4 percent on FHA loans and 0.2 percent on VA mortgages.