Inflation Data Sends Rates into Retreat
Freddie Mac's Primary Mortgage Market Survey for the week ended June 18 showed significant decreases in all mortgage products although they are still above the record low territory of late spring.
The 30-year fixed rate mortgage (FRM) dropped to 5.38 percent with 0.7 point from the average of 5.59 percent with 0.7 point reported last week after three consecutive weeks of increases left the average of 4.82 percent reported on May 21 in the dust.
The 15-year FRM averaged 4.89 percent compared to a week earlier when the average was 5.06 percent. Fees and points were unchanged at 0.7 point. Before the recent run-up of rates new mortgagees were enjoying 15-year rates that averaged 4.5 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) dropped 20 basis points from the previous week, averaging 4.97 percent. Fees and points both weeks were 0.6 point.
“Reports of benign inflation figures reversed the upward trend of mortgage rates this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The producer price index rose only 0.2 percent in May, roughly a third less than the consensus forecast and the consumer price index increased by just 0.1 percent. Moreover, the 12-month drop of 5.0 percent in producer prices was the largest since 1949 and the 1.3 percent yearly decrease in consumer prices the biggest since 1950.
“It's still too early to tell whether the decline in housing market activity has hit bottom yet. The prior three-week run up in rates for 30-year fixed mortgages, which amounted to over 0.75 percentage points, is starting to slow homebuyer demand, at least temporarily. Mortgage applications for home purchases fell for the first time in four weeks, slipping 3.5 percent for the week ending June 12th, according to the Mortgage Bankers Association. In addition, although new construction of one-family homes rose for the third consecutive month in May by 7.5 percent and the National Association of Home Builders reported that homebuilder assessments of market conditions in June and for the remainder of this year had weakened.”
Weekly yields for Fannie Mae mortgages, however, continued to climb, perhaps reflecting the earlier closing date for its survey.
According to Fannie Mae's data, during the week ended June 12, the 30-year FRM rose to 5.260 percent compared to 5.17 percent the previous week. The 15-year FRM jumped from 4.57 percent to 4.7 percent while government guaranteed FHA and VA loans had an average for the week of 6.03 percent compared to 5.92 percent a week earlier.
The one-year ARM which averaged 3.53 percent during the week ended June 7 rose to 3.8 percent in the most recent period.
Fannie Mae yields are quoted net of servicing fees.
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