Adjustable-rate mortgages increased considerably this week on speculation the Federal Reserve will raise interest rates by the end of the month, according to surveys conducted by mortgage buyer Freddie Mac and Bankrate. Long-term mortgage rates remained stable.
In Freddie Mac’s weekly survey, the 30-year fixed-rate mortgage averaged 6.3 percent for the week ended today, up slightly from last week when it averaged 6.28 percent.
The average for the 15-year fixed-rate mortgage this week is 5.67 percent, up a little from last week when it averaged 5.63 percent. Points on both the 30- and 15-year averaged 0.7.
One-year Treasury-indexed adjustable-rate mortgages averaged 4.14 percent this week, with an average 0.7 point, up considerably from last week when it averaged 3.98 percent.
“The 1-year ARM responds more directly to movements by the Federal Reserve Board and market chatter has it that the Fed will not only raise rates at the end of this month, but may do so consecutively throughout the rest of the year,” said Frank Nothaft, Freddie Mac vice president and chief economist. “News like that is good news for keeping long-term fixed-rate mortgage rates low since those are more sensitive to inflationary expectations.
“All eyes will be on the Fed for the next few months at least. How aggressive or how measured the coming rate hikes are will determine the future direction of both short- and long-term mortgage rates.”
Fixed mortgage rates continue to move in small steps, but rates on one-year adjustable rate mortgages jumped significantly this week, according to Bankrate.com’s weekly national survey of large lenders.
The average 30-year fixed-rate mortgage increased from 6.34 percent to 6.36 percent, while the average one-year adjustable-rate mortgage increased from 4.12 percent to 4.32 percent. The average 30-year fixed-rate mortgage has fluctuated between 6.34 percent and 6.37 percent for the past month, while the average one-year ARM is now the highest since January 2003. The 30-year fixed-rate mortgages in this week’s survey had an average of 0.3 discount and origination points.
The 15-year fixed-rate mortgage, popular for refinancing, climbed 5 basis points to 5.75 percent, while the jumbo 30-year fixed-rate mortgage inched 1 basis point higher to 6.54 percent. A basis point is one one-hundredth of one percentage point.
Although fixed mortgage rates have been treading water over the past month, short-term interest rates have been particularly sensitive to the prospect of looming Federal Reserve interest-rate hikes. Another strong employment report released June 4 and Alan Greenspan’s hawkish comments about inflation on June 8 affirmed that the Fed will begin boosting interest rates at the end of June.
Yields for short-term Treasury bills, a common benchmark for adjustable-rate mortgages, increased to reflect the likelihood of upcoming interest-rate hikes. After rising rapidly between March and May, long-term Treasury yields responded in a more modest fashion. Mortgage rates are closely related to the yields on government bonds.
The following is a sampling of Bankrate’s average 30-year-mortgage interest rates this week in some U.S. metropolitan areas.
New York – 6.38 percent with 0.13 point
Los Angeles – 6.35 percent with 0.45 point
Chicago – 6.41 percent with 0.08 point
San Francisco – 6.38 percent with 0.27 point
Philadelphia – 6.37 percent with 0.27 point
Detroit – 6.3 percent with 0.28 point
Boston – 6.41 percent with 0.1 point
Houston – 6.31 percent with 0.57 point
Dallas – 6.33 percent with 0.42 point
Washington, D.C. – 6.32 percent with 0.47 point
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