Fixed rates on home loans rose this past week. While market indicators point to little change over the next week, a key economic report due out tomorrow could alter that outlook.
Thirty-year fixed rates averaged
3.89 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Sept. 3.
That was worse than 3.84 percent in Freddie’s previous report. But long-term mortgage rates have eased compared to the same week last year, when the 30 year averaged 4.10 percent.
“The 30-year mortgage rate increased 5 basis points, but don’t read too much into that,” Freddie Mac Chief Economist Sean Becketti said in the report. “The Fed took great pains at the Jackson Hole conference to keep all their options open and to avoid making too much — or too little — of the situation in China and the volatility in global equity markets.”
MBSQuoteline Director Joe Farr noted that mortgage rates have worsened since Freddie conducted its survey.
“This week’s Freddie Mac survey was conducted at the height of the stock market sell-off and caught mortgage rates at the best levels of the week,” Farr said in a written statement. “Unfortunately, since then mortgage rates have reversed some of the improvement and as of Thursday are a little higher than what the survey indicates.”
A Mortgage Daily analysis of this week’s Treasury market activity suggests that fixed rates are unlikely to be much different in Freddie’s next report.
A majority — 62 percent — of panelists surveyed by Bankrate.com for the week Sept. 3 to Sept. 9 agreed with Mortgage Daily and predicted no change over the next week for mortgage rates. An increase of at least three BPS was projected by less than a third of the panelists, and just seven percent expected a decline.
However, the forecast of little change could be tossed out the window if tomorrow’s employment report comes in stronger or weaker than market expectations.
“This Friday’s employment report is the last piece of significant, solid evidence the FOMC will have to consider before their September decision,” Becketti added. “The street appears to be calling it a coin flip.
“There won’t be a clear direction for mortgage rates until the Fed makes its September decision, at the earliest.”
Freddie’s August 2015 Economic and Housing Market Outlook projects that 30-year fixed rates will average 4.1 percent in the current quarter then rise 20 BPS each of the following three quarters.
In the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Aug. 28, interest rates on jumbo mortgages were a whopping 28 BPS less than on conforming loans. The jumbo-conforming spread widened from a negative 25 BPS one week prior.
Freddie’s survey indicated that 15-year fixed rates averaged 3.09 percent, climbing three BPS from the week ended Aug. 27, 2015. The spread between 15- and 30-year rates widened to
80 BPS from 78 BPS seven days earlier.
At 2.93 percent — five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged three BPS more than in Freddie’s last report.
Freddie’s outlook calls for hybrid ARMs to average 3.2 percent in the third quarter and 3.4 percent in the final quarter of this year.
Freddie reported that one-year Treasury-indexed ARMs averaged 2.62 percent in the most-recent report, no different than a week earlier but 22 BPS worse than in the week ended Sept. 4, 2014.
Freddie forecasts the one-year ARM to average 2.5 percent during the third quarter then increase 10 BPS each of the following three quarters.
One-year ARMs adjust based on the yield of the one-year Treasury, which closed at 0.36 percent Thursday, according to data from the Department of the Treasury. The one-year Treasury yield was unchanged from a week prior.
A far less-utilized ARM index, the six-month London Interbank Offered Rate, was 0.54 percent as of Wednesday, Bankrate.com reported, two BPS worse than in the previous week.
ARM share in the latest Mortgage Market Index report was 13.6 percent, widening from 11.6 percent one week prior.
Freddie has ARM share at nine percent during the entire second half of this year.
