Current market rates

The average 30-year and 15-year fixed-rate mortgage rates increased to their highest levels in over a year during the week ending June 14, 2013. Driving these rate increases, the 10-year Treasury NoteA leading indicator of the direction of future Freddie Mac rates, influenced by worldwide demand for the dollar and anticipated future domestic inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI).. climbed slightly. The difference between the 30-year mortgage rate and the 10-year Treasury Note rateThe interest rate agreed to between the homebuyer and the lender on the promissory note. Contrast with real interest rate. increased to 1.78%. This is 0.38 percentage points above the historical spread, indicating homebuyers are still overpaying for mortgages.

Nearly all rates used to set adjustable rate mortgages (ARMs) decreased in May 2013. These include the 6-month and 3-month Treasury Bill rates, the London Inter-Bank Offered Rate (LIBOR), and the 12-Month Treasury Average.

As of May 2013, the average ARM rate has likely bottomed. This rate will increase once the Federal ReserveThe central bank in control of regulating the U.S. financial and monetary system. inevitably raises its rates. ARM use will pick up when home prices rise consistently faster than the rate of inflation and buyers seek to extend their purchasing powerA homebuyer's ability to purchase property based on a standard 31% of their gross income and current interest rates..

Average 30-Year Conventional Commitment Rate
Chart update 06/13/13
Current 06/13/13 3.98%	Month ago 05/16/13 3.48%	Year ago 06/14/12 3.65%
The average 30-year commitment rate is the rate at which a lender commits to lend mortgage money in the United States-West as reported by Freddie Mac. The western region includes CA, AZ, NV, OR, WA, UT, ID, MT, HI, AK, and GU. More information is available on Freddie Mac’s Primary Mortgage Market Survey report.
Average 15-Year Conventional Commitment Rate
Chart update 06/13/13
Current 06/13/13 3.09%	Month ago 05/16/13 2.63%	Year ago 06/14/12 2.95%
The average 15-year commitment rate is the rate at which a lender commits to lend mortgage money in the United States-West as reported by Freddie Mac. More information is available on Freddie Mac’s Primary Mortgage Market Survey report.
5/1 Adjustable Rate MortgageA variable interest rate note based on a particular index, often starting out with an introductory "teaser" rate, only to reset at a much higher rate in a few months or years. (ARM) Average Rate
Chart updated 05/30/13
May 2013 2.49%	Apr 2013 2.52%	May 2012 2.83%
The 5/1 average adjustable rate mortgage (ARM) rate shows the average rate for the first five years after origination, as reported by Freddie Mac. After the initial five-year period, the ARM rate is adjusted annually based on an index figure, such as a certain Treasury Bill rate (which reflects Federal Reserve rate movements) or the London Inter-Bank Offered Rate (LIBOR).
10-Year T-Notes – Average Market Yield
Chart update 06/13/13
Current 06/11/13 2.20%	Month ago 05/13/13 1.92%	Year ago 06/12/12 1.67%
This rate is a leading indicator of the direction of future Freddie Mac rates. The 10-year rate historically runs closer to 4% during a stable money market. The rate is influence by worldwide demand for the dollar and anticipated future domestic inflation.
Combined Average 15-, 30-Year Conventional Rates and 10-Year Treasury Note Average
Chart update 06/10/13
Average 15-Year May 2013 2.68%	Average 30-Year May 2013 3.51%	10-Year Treasury Note Average May 2013 1.93%
The average 15- and 30-year conventional commitment rates are the rates at which a lender commits to lend mortgage money in the United States-West for the duration of the life of each respective loan as reported by Freddie Mac. More information is available on Freddie Mac’s Primary Mortgage Market Survey report. The green line reflects the 10-Year Treasury Note Average, a leading indicator of the direction of future Freddie Mac rates. It is comprised of the level of world-wide demand for the dollar and anticipated future domestic inflation.
91-Day Treasury BillThe rate used by sellers to impute and report interest when a seller is not paid interest on their 1031 monies. – Average Auction Rate
Chart update 06/13/2013
Current 06/13/13 0.045%	Month Ago 05/16/13 0.045%	Year Ago 06/14/12 0.085%
This rate determines the minimum interest rate the seller must use in a delayed §1031 transactionA sales transaction in which sales proceeds are reinvested in a replacement like-kind property, the profits of which are untaxed. and report when not receiving interest on §1031 monies held by a facilitator/accommodator. This rate also sets the amount of the ordinary income the facilitator/accommodator must report. [For more on the use of §1031 monies, see the August 2008 article, Interest imputed on §1031 monies delivered to facilitators.]
3-Month Treasury Bill
Chart update 06/13/13
May 2013 0.04%	Apr 2013 0.06%	May 2012 0.09%
The 3-Month Treasury Bill is the rate managed by the Federal Reserve through the Fed Funds Rate as the base price of borrowing money in the short-term. It is used in determining the yield spreadThe difference between the 10-year Treasury Note rate and the 3-month Treasury Bill rate, forecasting economic conditions one year forward., which predicts the likelihood of a recessionAn economic event triggered and controlled by the Federal Reserve to maintain the sustainability of economic growth. one year forward. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay. [See the first tuesday article, Using the yield spread to forecast recessions.]
6-Month Treasury Bill
Chart update 06/13/13
May 2013 0.08%	Apr 2013 0.09%	May 2012 0.15%
The six-month T-Bill rate is one of several indices used by lenders to periodically adjust the adjustable rate mortgage (ARM) rate. The adjusted rate equals the indexed rate (at the time of adjustment or an average of several prior rates) plus the lender’s profit margin. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay.
Treasury Securities Average Yield — 1-Year Constant Maturity
Chart update 06/06/13
May 2013 0.12%	Apr 2013 0.12%	May 2012 0.19%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate.The ARM interest rate equals T-Bill yield, plus the lender’s profit margin. The index is an average of T-Bill yields with maturities adjusted to one year.
12-Month Treasury Average
Chart update 06/06/13
May 2013 0.163%	Apr 2013 0.169%	May 2012 0.147%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. This figure is an average of the one-year T-Bill rates for the past 12 months.The ARM interest rate equals the 12-Month Treasury Average yield plus the lender’s profit margin. There is a one-two month lag in data reporting for the 12-Month Treasury Average.
Cost of Funds IndexOne of several indices referenced by lenders in adjustable rate mortgage notes to adjust the note's interest rate. This index is one of the steadiest. (11th FHLBB District)
Chart update 05/30/13
May 2013 0.97%	Apr 2013 0.99%	May 2012 1.16%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. The ARM interest rate equals Cost-of-Funds, plus the lender’s profit margin. Current index reflects the cost of funds two months’ prior in the United States-West. More information is available on the Federal Home Loan Bank of San Francisco Cost of Fund’s Index page.
London Inter-Bank Offered Rate
Chart update 05/30/13
1 Month 0.19%	6 Month 0.42%	1 Year 0.69%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate.The ARM interest rate equals the LIBOR rate plus the lender’s profit margin. The rate is set by the banks in London, England.
Prime RateA base rate used by banks to price short-term business loans, set 3% above the federal fundsOvernight funds lent to banks with insufficient reserves by the Federal Reserve and other banks with excess reserves. rate.
Chart update 05/30/13
May 2013 3.25%	Apr 2013 3.25%	May 2012 3.25%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate.The Prime Rate is used by banks to price short-term business loans and set ARMs tied to the Prime Rate. Historically the rate is 3% over the Federal Funds Target Rate.
Discount RateThe interest rate the Federal Reserve charges banks and thrifts who borrow funds directly from the Fed to maintain reserve requirements. – Federal Reserve Bank of San Francisco
Chart update 05/30/13
May 2013 0.75%	Apr 2013 0.75%	May 2012 0.75%
Usury law limits the annual interest yield on nonexempt loans to 10%, or the discount rate plus 5%, whichever is greater. The discount rate is charged on loans made by the the Federal Reserve Bank to its members. More information is available on the Federal Reserve Bank of San Francisco’s Discount Rate page.
Applicable Federal Rates
Chart update 05/30/2013
Short (to 3 years) June 2013 0.18%	Medium (3 to 9 years) June 2013 0.95%	Long (9+ years) June 2013 2.44%
These rates determine minimum interest yield reportable on carryback financing. The AFR category is determined by the carryback due dateThe date provided in the rental or lease agreementThe written document which sets the terms of a fixed-term tenancy. on which rental payments are due.. *Rates are for monthly payments. More information on AFRs on other payment periods can be found on the Internal Revenue Service Applicable Federal Rates page.

*Rate information gathered from:
The Federal Reserve Board
Federal Reserve Bank of San Francisco
Federal Reserve Bank of St. Louis
The Bureau of Labor Statistics
Federal Home Loan Bank of San Francisco
Federal Home Loan Mortgage Corporation (Freddie Mac)
Federal National Mortgage Association (Fannie MaeA government-sponsored entity operating in the secondary mortgage market.)
U.S. Department of Labor
U.S. Department of the Treasury
Internal Revenue Service

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ft Editorial Staff

is the writing staff comprised of legal editor Fred Crane, In-House Broker Consultant Fernando Nunez and writer-editors Connor P. Wallmark, Giang Hoang-Burdette, Jeffery Marino, Carrie B. Reyes, Sarah Cantino, Matthew Taylor, Matthew Shade and Nicole Jessen.