The drop in mortgage rates this week is only a temporary phenomenon as the recent Fed’s announcements will make the rates to tick back up again soon, notes Freddie Mac.

Freddie Mac: Mortgage Rates Dip Is A Temporary Phenomenon

In its Primary Mortgage Market Survey results released Thursday, Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) anticipates interest rates may begin to trend higher going into next week.

Fixed mortgage rates move down a tad

The report highlights that for the week ending March 20, the average rate for a 30-year fixed-rate mortgage (FRM) was 4.32%, down from 4.37% the week prior. However, a year ago this time, the 30-year FRM averaged 3.54%.

The Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) survey also reveals that the average rate for a 15-year FRM was 3.32%, a drop from 3.38% the previous week, though a year ago at this time, it averaged 2.72%.

Echoing the trend, the average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) too dropped to 3.02% from 3.09% the week prior, while a year ago, the five-year ARM averaged 2.61%.

However, the 1-year Treasury-indexed ARM too averaged 2.49% this week, with an average 0.4 point, up from last week when it averaged 2.48%. At this time last year, the 1-year ARM averaged 2.63%.

The following graph sets forth the trend in the rates for all the four categories:

Freddie's Primary Market Market Survey

Fed’s move to revive rates uptick

A couple of days back, the Federal Open Market Committee announced that beginning in April, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $25 billion per month, down from $30 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $30 billion per month, down from $35 billion per month. This amounts to another $10 billion per month of tapering.

The Fed also modified its forward guidance, which had previously suggested an increase in rates once a 6.5% unemployment level was reached.

The Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) report points out that with the Fed announcing that it will continue tapering its bond-buying program and its indication that a hike in short-term rates may come as soon as mid-2015, it is expected that rates will tick back up again soon.

The report also highlights that the rate on the 10-year Treasury note rose following the Fed’s announcement this week, and if this holds, interest rates may begin to trend higher going into next week.