Fixed interest rates on home loans took a nice dip this week but look ready to bounce back up in the next report.
Loan originators quoted an average of 4.32 percent for 30-year fixed-rate mortgages, according to Freddie Mac’s Primary Mortgage Market Survey for the week ended March 20.
Thirty year rates dropped from a week earlier, when they averaged 4.37 percent. In the same week last year, the average was 3.54 percent.
A decline in housing starts placed downward pressure on rates, according to Freddie Mac Chief Economist Frank Nothaft.
Last month, 30-year fixed rates averaged 4.655 percent, according to Ellie Mae, lower than 4.723 percent in January.
Thirty-year fixed rates are poised to rise around 7 basis points in the next report from Freddie based on an analysis of this week’s Treasury market activity. (this was mistakenly originally reported as “Thirty-year fixed rates are poised to drop around 7 basis points…”)
During the period that Freddie surveyed lenders this week, the yield on the 10-year Treasury note — a benchmark for fixed mortgage rates — averaged 2.72 percent, according to data reported by the Department of the Treasury. The 10-year yield Treasury yield closed Thursday at 2.79 percent.
Forty percent of panelists surveyed by Bankrate.com for the week March 20 to March 26 predicted mortgage rates will increase at least 3 BPS over the next week, while another 40 percent forecasted no change. Just 20 percent saw rates heading lower.
Freddie predicts that 30-year mortgages will average 4.4 percent in the first quarter, 4.5 percent in the second quarter and 4.7 percent in the third quarter.
Fannie Mae has 30-year fixed rates averaging 4.4 percent in the first half of this year then rising to 4.5 percent in the third quarter.
Economists at the Mortgage Bankers Association predict that the 30 year will average 4.4 percent during the first three months of 2014, then climb to 4.6 percent in the second quarter and 4.9 percent in the third quarter.
Jumbo mortgages were priced at a six-basis-point premium to conforming loans in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended March 14, better than the 8-basis-point jumbo-conforming spread a week earlier.
Freddie reported average 15-year fixed rates at 3.32 percent, 6 BPS better than in the previous report. Fifteen-year mortgages became more attractive, with the spread between 15- and 30-year rates widening to 100 BPS from  99 BPS seven days earlier.
A 7-basis-point improvement from the week ended March 13 left five-year, Treasury-indexed, hybrid adjustable-rate mortgages averaging 3.02 percent in Freddie’s report.
Freddie expects hybrid ARMs to increase from 3.1 percent in the current quarter to 3.2 percent in the second quarter and 3.3 percent the following three-month period.
Fannie predicts the five-year ARM will average 3.1 percent in the first quarter then rise 10 BPS each of the following five quarters.
One-year Treasury-indexed ARMs averaged 2.49 percent in Freddie’s survey, a basis point higher than a week earlier. Compared to Freddie’s survey for the week ended March 21, 2013, one-year ARMs have tumbled 14 BPS.
Freddie has one-year ARM rates at 2.6 percent for the first nine months of 2014.
In Fannie’s outlook, the one-year ARM will average 2.5 percent this quarter then increase 10 BPSÂ each quarter through the first quarter of next year.
One-year ARMs adjust based on the one-year Treasury note yield, which jumped to 0.14 percent today from 0.12 percent last Thursday based on Treasury Department data.
No change from last week left the six-month London Interbank Offered Rate at 0.33 percent as of Wednesday, Bankrate.com reported.
In the latest Mortgage Market Index report, ARMs accounted for 13.7 percent of pricing inquiries, up from 13.6 percent in the previous report.
ARM share slipped to 6.9 percent in February from 7.2 percent the prior month, Ellie said.
ARM share is expected by Freddie to be 10 percent in the first quarter then rise 1 percentage point each quarter through mid-2015.
Fannie projects ARM share will be 9 percent in the first quarter then rise 1 percentage point each of the following four quarters.
