A roughly seven basis point increase in 30-year weekly rates and gains in bond yields from recent record lows could dampen refinancing applications a bit unless they motivate a significant group of fence-sitting borrowers to act.
Freddie Mac's survey shows a seven basis point increase in the average 30-year rate for the week ending to 4.22% from record lows in conjunction with higher Treasury yields and improved housing data. The long-term rate-indicative 10-year Treasury yield as of late Thursday morning was at about 2.2% after dropping below 2% recently.
Credit Suisse in a report Thursday morning said the increase in rates seen this week on its survey could result in a decrease of about 200 points on the Mortgage Bankers Association's conventional refinancing index for this week when it comes out next Wednesday.
Managing director Mahesh Swaminathan said that this projected drop represents about a 4% to 5% decline, based on Credit Suisse survey data showing the average mortgage rate rising to 4.35% Wednesday from an average of about 4.25% over the past two weeks.
“So if for the next three days it is at 4.35% the average for this week will probably end up like 4.32% or 4.33%,” he said.
This “probably shifts that index down a little bit,” said Swaminathan, MBS senior strategist and group head.
LendingTree in its weekly rate report on Wednesday, which also pegged the average 30-year rate at 4.35%, said the recent increase in rates means the opportunity for fence sitters is ending. This could spur some to act.
That report by the company, which provides a platform to comparison-shop between mortgage lenders, also indicates spread between the highest rate and lowest rate on that platform has been the year's largest. Rates can vary as 1% from lender to lender, translating to a difference of about $140 per month on a $250,000 loan, according to the report.
According to Freddie, only the lesser-used average five-year Treasury-indexed hybrid rate showed a one-basis decrease during the week ending Aug. 25 to a new record low of 3.07%.