The benchmark 30-year mortgage fell to a new low and doesn’t appear to be headed higher anytime soon. Also establishing a record low was the hybrid adjustable-rate mortgage. Dragging mortgage rates lower was downbeat economic news.
A new record low was reached for the average 30-year fixed-rate loan in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday: 3.66 percent. A week earlier, 30-year mortgages were 3.71 percent, while the average was 4.50 percent a year earlier.
“Treasury bond yields eased somewhat this week on some worsening economic indicators bringing mortgage rates back into record low territory. Industrial production fell in two of the last three months ending in May, and below the expected market consensus forecast,” Freddie’s chief economist, Frank Nothaft, explained in the report. “In addition, consumer sentiment fell in June to its lowest level this year, according to the University of Michigan survey.
“In its June 20th monetary policy announcement, the Federal Reserve also noted growth in employment has slowed in recent months and household spending appears to be rising at a somewhat slower pace.”
No change is likely in mortgage rates by the next report based on the 10-year Treasury yield, which averaged 1.63 percent during the period when Freddie surveyed lenders for the latest report, according to data released by the Department of the Treasury. The 10-year yield closed Thursday at 1.63 percent.
Half of Bankrate.com’s panelists for the week June 21 to June 27 agreed with Mortgage Daily’s outlook that rates won’t move over the next week, while a third predicted an increase of at least 3 BPS and the rest saw a decline ahead.
Fannie Mae projects that the 30 year will average 3.8 percent from the third quarter of this year through the middle of next year.
Freddie sees the 30-year mortgage at 3.8 percent in the second and third quarters of 2012 and 4.0 percent in the final three months of the year.
The premium for a jumbo mortgage was 70 BPS in the Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended June 15, worsening from 65Â BPS in the prior report.
While the 15-year fixed-rate mortgage was lower in Freddie’s report — falling 3 basis points to 2.95 percent — it wasn’t a record. The appeal of the 15 year diminished this week as the spread between 15- and 30-year loans fell to 71 BPS from last week’s spread of 73 BPS.
A new record, however, was reported by Freddie for the five-year, Treasury-indexed, hybrid ARM: 2.77 percent. The five-year ARM was 2.80 percent in the prior week.
A 4-basis-point week-over-week decline was recorded for the one-year Treasury-indexed ARM, which averaged 2.74 percent in Freddie’s survey. A year ago, the one year averaged 2.99 percent.
In the longer term, Freddie predicts that one-year ARMs will average 2.8 percent in the second quarter then rise 10 BPS each quarter until the end of the year.
Fannie’s forecast has the one year at 2.8 percent all of this year and during the first nine months of 2013.
The one-year ARM adjusts based on changes to the yield on the one-year Treasury note, which inched up to 0.19 percent Thursday from 0.18 percent seven days earlier based on Treasury Department data.
But the six-month London Interbank Offered Rate again saw no movement, remaining at 0.74 percent as of Wednesday where it’s been stuck since May 23.
Inquiries for ARMs accounted for 3.3 percent of all activity in the latest Mortgage Market Index report, falling from 3.9 percent a week prior.
Expected ARM share of applications in Fannie’s forecast is 6 percent for the first three quarters of 2012 and 7 percent during the following three quarters.
ARM share of production, meanwhile, is projected by Freddie to be 15 percent for the rest of this year and all of 2013.
