Mortgage Rates Surge on Inflation Jitters

The average for the 15-year FRM this week is 6.36 percent, with an average 0.5 point, up from last week’s average of 6.25 percent.  A year ago, the 15-year FRM averaged 5.16 percent.  The 15-year FRM has not been higher since May 17, 2002, when it averaged 6.37 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.32 percent this week, with an average 0.6 point, up from last week when it averaged 6.23 percent.  A year ago, the five-year ARM averaged 5.05 percent.  This is the highest the 5-year ARM has been since Freddie Mac started tracking it on January 6, 2005.

One-year Treasury-indexed ARMs averaged 5.75 percent this week, with an average 0.8 point, also up from last week when it averaged 5.66 percent.  At this time last year, the one-year ARM averaged 4.23 percent.  The 1-year ARM has not been higher since August 3, 2001, when it averaged 5.77 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“Financial markets believe that the current rate of inflation is above the Fed’s comfort zone, which will lead to more rate hikes in the near future,” said Frank Nothaft, Freddie Mac vice president and chief economist.  “A rate hike in June is thought to be a sure thing, and what was believed to be a vaguely possible hike in August is now considered to be highly likely; that change in market expectations caused mortgage rates to jump higher this week.”
 

Freddie Mac defines its regions as follows:
Northeast:  NY, NJ, PA, DE, MD, DC, VA, WV, PR, ME, NH, VT, MA, RI, CT, VI
Southeast:  NC, SC, TN, KY, GA, AL, FL, MS
North Central:  OH, IN, IL, MI, WI, MN, IA, ND, SD
Southwest:  TX, LA, NM, OK, AR, MO, KS, CO, NE, WY
West:  CA, AZ, NV, OR, WA, UT, ID, MT, HI, AK, GU   

DEFINITIONS
Commitment Rate is 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 –is the One-year Treasury
Loan to Value Ratio (LTV) is 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 are the total charged by the lender at settlement. One point equals one percent of the loan amount.
Margin is a fixed amount added to the underlying index to establish the fully indexed rate for an ARM.
Weighted Averages for the Primary Mortgage Market Survey have been adjusted as of September 22, 2005. The new weights use the dollar volume of conventional mortgage originations within the 1-unit Freddie Mac loan limit as reported under the Home Mortgage Disclosure Act (HMDA) for 2004.  The weights are listed in the table below.