Better-than-expected durable goods, increasing inflation risks and improving odds of a Federal Reserve rate hike by year end has led to a sharp sell-off in Treasurys this week. This is why it is no surprise that fixed mortgage rates jumped in Freddie Mac's latest survey.
The 30-year fixed mortgage rate rose 10 basis points to 6.08%, which is the highest it's been since March 13 when it was reported at 6.13%. Meanwhile, 15-year fixed mortgage rates averaged 5.66% versus 5.55% last week. While rates remain substantially below year ago levels, 6.42% on 30-year and 6.12% on 15-year, mortgage application activity is expected to remain stalled on increasing worries about jobs, inflation and tight credit standards.
Rate changes were more subdued on the adjustable side with five-year hybrid ARMs, increasing just one basis point to 5.62%, while one-year ARM rates slipped two basis points to 5.22%.
For the month of May, the 30-year fixed mortgage rate averaged 6.03% versus 5.95% in April. Refinancing activity has also been declining in May and in the first three weeks is averaging 8% below April's average. This suggests prepayments in June, which are going to be reported in July, could be flat to slightly lower. Current projections have speeds increasing just 1% to 2% in June.