After taking a breather for seven days, fixed interest rates on residential loans are likely to escalate in the next report.
Thirty-year fixed rates averaged 4.02 percent in Freddie Mac’s Primary Mortgage Market Survey for the week that ended on May 4.
That was minimally less than 4.03 percent the prior week. But long-term rates deteriorated compared to 3.61 percent the same week last year.
“Markets have been erring on the side of caution following a weak advance estimate for first-quarter GDP and the FOMC’s broadly expected decision to leave rates unchanged,” Freddie Mac Chief Economist Sean Becketti said in the survey.
The Federal Open Market Committee did announce on Wednesday after a two-day meeting that it would not raise rates.
National Association of Federally Insured Credit Unions Chief Economist Curt Long sees the FOMC’s move as rational.
“The FOMC is not overreacting to the mediocre economic data received in recent months,” Long explained in a written statement. “The committee seems convinced that the overall trajectory of the economy remains solid. We are still on track for a rate hike at the committee’s next meeting in June, although poor jobs data later this week could cloud the issue.”
MBSQuoteline Director Joe Farr explained in a written statement to Mortgage Daily that prices on mortgage-backed securities have deteriorated since Freddie surveyed lenders this week. Bond yields move inversely to bond prices.
“As a result, mortgage rates on Thursday are a little higher than what the Freddie Mac survey suggests,” Farr said.
Fixed rates are probably going to be roughly 4 basis points higher in Freddie’s next survey according to a Mortgage Daily analysis of Treasury market activity.
But 70 percent of panelists surveyed by Bankrate.com for the week May 4 to May 10 predicted that mortgage rates won’t change over the next week. Just a fifth expected an increase of at least 3 BPS, and only a tenth projected a decline.
A weak employment report tomorrow, however, could pull rates lower.
Interest rates on jumbo mortgages were 8 BPS less than conforming rates, according to the U.S. Mortgage Market Index report from Mortgage Daily and OpenClose for the week ended April 28. The jumbo-conforming spread widened from 5 BPS the previous week.
Freddie’s survey had 15-year fixed rates averaging 3.27 percent in the latest report, no different than in the week ended April 27. Fifteen-year rates were 75 BPS less than 30-year rates, slightly less than 76 BPS the previous week.
Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 3.13 percent in Freddie’s latest report, a basis point more than the previous week.
The index used on hybrid ARMs, the yield on the one-year Treasury note, climbed to 1.11 percent Thursday from 1.06 percent seven days earlier, according to Treasury Department data.
Another ARM index, the six-month London Interbank Offered Rate, was 1.43 percent as of Wednesday,
modestly higher than 1.42 percent seven days prior, Bankrate.com reported.
ARM share widened to 8.3 percent in the latest Mortgage Market Index report from 8.2 percent one week earlier.
