PMMS : U.S. Mortgage Rates Soar To Four-month High

by Ike Obudulu Last updated on April 11th, 2019,

McLean, Virginia, USA : The 30-year fixed-rate mortgage averaged 4.65% in the September 20 week, according to Freddie Mac’s weekly survey (PMMS). That was up five basis points during the week, and marked the fourth straight weekly gain. The 15-year fixed-rate mortgage averaged 4.11%, also up five basis points. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.92%, down from 3.93%.

The 30-year-fixed rate has averaged 4.46% throughout the year, up from 3.99% in 2017.

Rates for home loans jumped in step with yields in the bond market even as fresh reminders of familiar headwinds stalked the housing market.

Mortgage rates track alongside the benchmark 10-year U.S. Treasury note yield TMUBMUSD10Y, -0.12% , which roared to a four-month high as trade war fears eased and Federal Reserve officials doubled down on their intentions to raise interest rates.

The popular 30-year fixed-rate mortgage is also at a four-month high, and while a few basis points wouldn’t dampen demand for home financing in a healthy market, current market conditions look vulnerable.

Builders broke ground on more homes in the most recent month, but applied for far fewer permits — a sign that construction activity may soon start to decline. Sales of previously-owned homes are 1.2% lower in the year to date than in the same period last year, just months after finally regaining a post-crisis high.

“Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since it’s creation by Congress in 1970, Freddie Mac has made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders and taxpayers.”

Primary Mortgage Market Survey Definitions

Commitment Rate : The interest rate a lender would charge to lend mortgage money to a qualified borrower exclusive of the fees and points required by the lender. This commitment rate applies only to conventional financing on conforming mortgages with loan-to-value rates of 80 percent or less.

ARM Index ; The one-year Treasury

Loan to Value Ratio (LTV) : The ratio of the loan amount of a mortgage loan to the lower of the appraisal value or purchase price of the property securing the loan.

Origination Fees and Discount Points : The total charged by the lender at settlement. One point equals one percent of the loan amount.

Margin : A fixed amount added to the underlying index to establish the fully indexed rate for an ARM.

Primary Mortgage Market Survey

Since April 1971, Freddie Mac has surveyed lenders across the nation weekly to determine the average 30-year fixed-rate mortgage rate; in 1984, the 1-year ARM was added to the survey and the 15-year fixed-rate mortgage rate was included beginning in 1991. In January 2005, Freddie Mac added a 5/1 hybrid ARM series to the survey. In January 2016, the 1-year ARM was discontinued.

Currently, about 25 lenders from each of Freddie Mac’s five regions are surveyed each week. The mix of lenders surveyed approximates the volume of mortgage loans that each lender type originates nationwide.

Survey reminder emails are sent out on Mondays and lenders are asked to respond by close of business Wednesday. If we have received no response on Tuesday, Freddie Mac follows up with a reminder email on Wednesday morning. Freddie Mac receives a few responses on Monday, but most responses are returned on Tuesday with the balance received on Wednesday. So, in general, the PMMS rates reflect loans offered Monday through Wednesday.

The survey results each week are weighted based on the most recently released dollar volume of conventional, single-family originations within the Freddie Mac one-unit loan limit reported under the Home Mortgage Disclosure Act (HMDA) data – prior survey averages are not adjusted. The HMDA data are typically published in September of each year for the immediately prior year. To do the weighting, Freddie Mac takes the HMDA state origination volumes and aggregate them to the five regions to establish regional weightings. A national average is then calculated as the weighted average of the five regional averages. In addition, when calculating the regional averages, we discard any rate/point combination outlier that is more than one standard deviation from the region’s mean.

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