Mortgage Loan Rates Volatile in Run-Up to Fed Announcement

The Mortgage Bankers Association (MBA) released its report on mortgage applications Wednesday morning. It noted a week-over-week decrease of 1.1% in the group’s seasonally adjusted composite index for the week ending December 11, following an increase of 1.2% for the week ending December 4. Mortgage loan rates increased slightly on adjustable rate loans last week and decreased slightly or remained the same on other loan types.

On an unadjusted basis, the composite index decreased by 2% week over week. The seasonally adjusted purchase index decreased by 3% compared with the week ended December 4. The unadjusted purchase index decreased by 7% for the week and is now 34% higher year over year.

The MBA’s refinance index increased by 1% week over week, and the percentage of all new applications that were seeking refinancing rose from 58.7% to 60.7%.

Adjustable rate mortgage loans accounted for 6% of all applications, down from 6.2% the prior week.

Mortgage News Daily reports that a 30-year fixed-rate conforming loan averaged 4.08% on Tuesday, in a 52-week range of 3.55% to 4.20%. The loan rate rose four basis points in one day, a significant change indicating that volatility has increased as the mortgage markets await the announcement Wednesday from the Federal Open Market Committee (FOMC). The MBA report also noted that investors are reinvesting income from mortgage-backed securities (MBS) in more MBS. The total amount is $24 billion to $26 billion a month, “a staggering amount,” that works to push mortgage rates down, effectively canceling the impact of a Fed policy rate increase on mortgage rates.

According to the MBA, last week’s average mortgage loan rate for a conforming 30-year fixed-rate mortgage remained unchanged at 4.14%. The rate for a jumbo 30-year fixed-rate mortgage decreased from 4.02% to 4.01%. The average interest rate for a 15-year fixed-rate mortgage fell from 3.39% to 3.38%.

The contract interest rate for a 5/1 adjustable rate mortgage loan increased from 3.23% to 3.25%. Rates on a 30-year FHA-backed fixed-rate loan slipped from 3.91% to 3.90%.