A stock market selloff had mortgage rates lower this week, and it looks likely that they will hold at their current levels.
The fixed-rate 30-year mortgage averaged 3.41 percent for the week ended Thursday, according to Freddie Mac’s Primary Mortgage Market Survey. The 30 year fell from 3.43 percent in the prior report and 3.90 percent a year ago.
Mortgage rates moved lower as investors fled stocks — pulling the Dow Jones Industrial Average down more than 300 points since last Thursday.
Investors moved their money into bonds, dragging down the yield on the 10-year Treasury 10 basis points from a week ago.
Freddie Mac Chief Economist Frank Nothaft pointed to slowing consumer spending and contracting retail sales.
“In addition, the University of Michigan reported their Consumer Sentiment Index dropped 6.3 points in April to settle at 72.3, its lowest level since July,” Nothaft explained. “The April reading snapped a streak of three consecutive gains.”
A Mortgage Daily analysis of Treasury market activity indicates that mortgage rates will be about the same in Freddie’s next report. The yield on the 10-year Treasury note averaged 1.73 percent during the period primary lenders were surveyed by Freddie, according to data from the Department of the Treasury. The 10-year yield closed today at 1.72 percent.
A plurality of panelists surveyed by Bankrate.com for the week April 18 to April 24 predicted rates won’t move more than 2 BPS over the next week. Less than a third forecasted a decline and fewer than a quarter saw an increase ahead.
Freddie predicts that the 30-year mortgage will average 3.6 BPS in the second quarter and rise 10Â BPS every three months until the first-quarter 2014.
Rival Fannie Mae predicts 30-year mortgages will average 3.7 percent in the second quarter, 3.8 percent in the third quarter and 4.0 percent in the fourth quarter.
Jumbo borrowers paid a 30-basis-point premium in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended April 12, deteriorating from the previous week’s 24-basis-point jumbo-conforming spread.
A single-basis-point drop from the week ended April 11 left the 15-year mortgage at 2.64 percent in Freddie’s survey. A shorter term product provided 15-year borrowers with a rate that 77 BPS better than the 30-year mortgage, not as good as the 78-basis-point spread in the previous report.
At 2.60 percent, the five-year, Treasury-indexed, adjustable-rate mortgage was 2 BPS lower than Freddie’s last report.
Fannie expects the five-year ARM to average 2.8 percent this quarter and 3.0 percent in the third quarter.
Freddie said the one-year Treasury-indexed ARM was up 1 basis point from the prior week to 2.63 percent. In the week ended April 19, 2012, the one year averaged 2.81 percent.
Freddie expects the one-year ARM to average 2.6 percent in the second and third quarters
The outlook from Fannie has the one year at 2.7 percent this quarter and 2.8 percent in the third quarter.
The index for the one-year ARM, the yield on the one-year Treasury note, was unchanged from a week earlier at 0.12 percent Thursday, based on the Treasury Department data.
The six-month London Interbank Offered Rate was reported by Bankrate.com at 0.44 percent as of Wednesday, the same as a week earlier.
ARMÂ share was a little more than 4.8 percent in the most recent Mortgage Market Index report, not much different than the prior week.
Freddie’s forecast has ARM share at 11 percent in the second quarter and rising 1 percentage point each quarter through mid-2014.
Fannie sees ARM share at just 5 percent during the first half of this year. But Fannie also projects ARM share will reach 12 percent by the second-quarter 2014.
