After weeks of relative inactivity, long-term interest rates took a huge jump, finishing the week ended June 12 at an eight-month high.
According to the Freddie Mac Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 6.32 percent with 0.7 point. During the week ended June 5 the average was 6.09 percent, also with 0.6 point.
The 15-year FRM carried an average interest rate of 5.93, an increase of 28 basis points from the previous week. Fees and points were unchanged at 0.6.
For both the 15-year and the 30-year FRM the rates were the highest since the week ended October 25, 2007.
Short term rates were up, but less aggressively than longer term rates. The five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.70 with 0.7 point, up from the previous week when it averaged 5.51 percent with 0.5 point. During the week ended May 1 the hybrid averaged 5.73 percent.
One-year Treasury-indexed ARMs carried an initial rate of 5.09 percent with 0.6 point compared to the week before when it was 5.06 percent with 0.6 point.
"Mortgage rates jumped this week after a number of Federal Reserve (Fed) officials, most notably Chairman Bernanke and Vice Chair Kohn, expressed concern over a threat of inflation," said Frank Nothaft, Freddie Mac vice president and chief economist. "This led some market participants to believe that the Fed will raise rates more aggressively over the year than previously thought.
"Meanwhile, news reports on the housing market were mixed. Serious delinquencies (loans over due 90-days or more or in foreclosure) for both prime and subprime conventional mortgages nearly doubled between first quarter of 2007 and 2008, according to the Mortgage Bankers Association," Nothaft said. "However, the household debt service and homeowner financial obligation ratios improved over the same period. Moreover, pending home sales for April unexpectedly rose by 6.3 percent and mortgage applications for both home purchases and refinancing were also up last week."
Interest rates as reported by the Mortgage Bankers Association (MBA) in its Weekly Mortgage Applications Survey for the week ended June 13 also made some big moves.
The average contract interest rate for the 30-year FRM increased to 6.57 percent from 6.24 percent with points, including the origination fee, decreasing to 1.11 from 1.12.
Rates for 15-year fixed-rate mortgages increased to 6.14 percent from 5.78 percent with points decreasing from 1.12 to 1.1.
In the MBA survey even the short-term one-year ARM made a substantial move, increasing to 7.22 percent from 6.87 percent with points going from 1.42 to 1.56.
Mortgage activity as measured by the volume of loan applications was down 8.7 percent on a seasonally adjusted basis and 9.6 percent unadjusted from the previous week and was down 21.3 percent from the pace set during the same week in 2007.
Refinancing as a share of all mortgage activity continues to fall. Last week refinancing represented 37.4 percent compared to 39.8 percent of applications a week earlier. The market share of ARMs fell back into single digits with 9.7 percent of applications intended for that purpose compared to 10.3 percent a week earlier.