Positive news about the nation’s housing market helped to drive fixed mortgage rates to the highest level this year.
Thirty-year fixed rates averaged 3.87 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended May 28.
Turns out that this week’s average long-term mortgage rate was the highest that it has been so far this year.
A week earlier, 30-year rates averaged 3.84 percent, while the average was 4.12 percent a year earlier.
Freddie Mac Deputy Chief Economist Len Kiefer attributed the increase to positive data on housing.
“New home sales surged 6.8 percent to an annual pace of 517,000 units in April,” Kiefer said in the report. “Although existing home sales slipped 3.3 percent to a seasonally-adjusted pace of 5.04 million units, sales are up 6.1 percent on a year-over-year basis. The S&P/Case-Shiller 20-city home price index also posted a solid gain of 5 percent over the 12-months ending in March 2015.”
Joe Farr, director at MBSQuoteline, explained in a statement that prices on mortgage-backed securities have improved since Freddie conducted its survey.
Freddie’s regulator-conservator, the Federal Housing Finance Agency, reported that 30-year fixed rates averaged 3.93 percent in April, down two BPS from March.
An analysis of Treasury market activity by Mortgage Daily suggests that fixed mortgage rates aren’t likely to be a whole lot different in the next survey.
But a majority of panelists surveyed by Bankrate.com for the week May 28 to June 3 predicted that mortgage rates will drop by at least three BPS over the next week. A quarter expected no change, and just 17 percent projected a decline.
In Fannie Mae’s Housing Forecast: May 2015, thirty-year fixed rates are expected to average 3.7 percent this quarter, 3.8 percent in the third quarter and 3.9 percent in the fourth quarter.
Another economic forecast from the Mortgage Bankers Association has 30-year rates rising from 4.1 percent this quarter to 4.3 percent in the third quarter and 4.4 percent in the final quarter of this year.
The difference between rates on jumbo mortgages and conforming loans widened to 17 BPS in the U.S. Mortgage Market Index report for the week ended May 22 from 16 BPS in the previous report.
Fifteen-year fixed rates averaged 3.11 percent in Freddie’s latest survey, six BPS more than in the week ended May 21. The spread between 15- and 30-year rates thinned to 76 BPS from the prior week’s 79 BPS.
Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2.90 percent, slightly higher than the previous week’s 2.88 percent.
Hybrid ARMs are forecasted by Fannie to
average 2.9 percent in the second quarter then rise 10 BPS each three months thereafter until the first-quarter 2016.
At 2.50 percent, the one-year Treasury-indexed ARM averaged one basis point less than in Freddie’s prior survey. The one year averaged 2.41 percent in the week ended May 29, 2014.
Fannie has one-year ARMs averaging 2.5 percent during this quarter then increasing 10 BPS each three months through the end of next year.
The yield on the one-year Treasury, which determines rate and payment adjustments on one-year ARMs, closed Thursday at 0.26 percent, jumping four BPS from seven days earlier, according to Treasury Department data.
Some subprime ARMs utilize the six-month London Interbank Offered Rate as their index. LIBOR was 0.43 percent as of Wednesday,
rising from 0.41 percent a week prior, Bankrate.com reported.
At 9.0 percent in the latest Mortgage Market Index report, ARM share was more narrow than 9.9 percent seven days previous.
From now through the end of the year, Fannie predicts ARM share will be eight percent.
