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Freddie Mac: Mortgage rates unwind after making progress

Rates jump back up

Mortgage rates climbed marginally higher heading into the holiday season, canceling out much of last week’s drop, Freddie Mac announced in its latest Primary Mortgage Market Survey. 

“Fixed mortgage rates retraced some of their decline of the prior week as housing data portrayed mixed signals. The National Association of Realtors reported that their pending sales metric dipped for the fifth consecutive month and was slightly below year-ago levels, presaging a softening in sales near year-end,” said Frank Nothaft, vice president and chief economist with Freddie Mac.

The 30-year, fixed-rate mortgage ticked back up to 4.29% from 4.22% last week and is drastically up from 3.32% a year ago.

Taking a slight jump higher, the 15-year, FRM averaged 3.30%, compared to 3.27% a week ago and 2.64% last year.  

Meanwhile, the 5-year Treasury-indexed adjustable-rate mortgage hit 2.94%, down from 2.95% last week but up from 2.72% a year prior.

The 1-year Treasury-indexed ARM slightly fell from 2.61 a week ago to 2.60% and is only slightly higher than 2.56% a year ago.

Nothaft noted that mortgage rates barely increased amid mixed housing data, with housing prices rising as homes-for-sale inventory remained tight in many markets.

“The S&P/Case-Shiller House Price index released yesterday showed prices in the 20 largest cities increased 13.3% annually in September, the highest year-over-year increase since February 2006, and a bit stronger than the Federal Housing Finance Agency's U.S.-wide Purchase-Only index, which appreciated 8.5% over the same period,” Nothaft said.

In correlation, Bankrate noted that the 30-year, fixed increased to 4.44%, up from 4.39%, while the 15-year fixed jumped to 3.47%, from 3.42% a week prior.

The 5/1 ARM also ticked higher and hit 3.29%, compared to 3.28% last week.

“Mortgage rates moved higher, unwinding much of last week's decline, following the release of the Federal Reserve's meeting minutes which raised worries about an earlier tapering of bond purchases,” Bankrate said.

“Concerns that the Fed may start dialing back the stimulus sooner than expected pushed bond yields and mortgage rates higher. Mortgage rates are closely related to yields on long-term government bonds,” Bankrate added.

As HousingWire previously reported, Nothaft said, “I do think in the first half of the year they will announce something on tapering, and they will start to pull back. But when you have a big investor like the Fed scale back their purchases, it will lead back to an uptick in yields, which will translate into higher mortgage rates.”

As a result, Nothaft predicts mortgage rates will approach and perhaps touch 5% by the end of 2014 due to quantitative easing. 

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