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April 11th, 2011

Mortgage rates remain on upward trend; be ready to act fast



Every action has a reaction. If you’re a potential homebuyer and/or refinancer, a dip in mortgage rates should certainly prompt you to act. As the title of our latest Market Trends Newsletter suggests, mortgage rates continued on their upward trend last week, and as far as this week goes, not much is expected to change.

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First, let’s take a look at last week’s figures:

HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages remained unchanged this week at 5.17% as a three basis point rise (.03%) in 30-year conforming rates was offset by a four basis point decline in 30-year FRM jumbos. A key component of the first-time homebuyer market and perhaps threatened by a federal government shutdown, FHA-backed 30-year fixed-rate mortgages rose by four basis points to land at 4.85%. ARMs are starting regain at least some favor in the market, and Hybrid 5/1 ARMs, perhaps the most preferred alternative to the traditional 30-year FRM (notably for jumbo buyers) increased a one one-hundredth of a percentage point (.01%) to stand at 3.85%.

Mortgage rates down, activity down

No, that subhead isn’t a mistake. Even though mortgage rates are down about a quarter of a percentage point from a year ago, both refi and purchase activity is also below where they were a year ago. Currently, the forces at play which serve to increase rates are outnumbering the forces which pull them downward. Potential homebuyers and refinancers should have all their ducks in a row to be able to act as soon as mortgage rates experience even a small dip.

Jumbo rates getting a little more normal

Some good news in all of this is that the spread between jumbo and government-supported conforming mortgage rates is narrowing, getting closer to pre-recession levels:

Pre-financial crisis, about a 20 basis point differential in rates was typical; in the worst of the market mess, that expanded by nine times normal to 180bp at its widest, but has gently retreated over time to a present-day gap of about 60 basis points. Additional narrowing seems possible but unlikely in present market conditions, but an expected increase in competition among jumbo lenders may trim it somewhat over time.

CJSpreads-04.11.11How high will mortgage rates rise this week?

To find out how much mortgage rates are expected to rise this week, please continue reading our latest Market Trends Newsletter titled, “Conforming mortgage rates remain on upward trend.”

If you’re looking for a mortgage-rate forecast that looks some nine weeks into the future, be sure to check out our “Two month forecast for mortgage rates.”

HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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