Fixed mortgage rates came in this week at the lowest levels ever recorded, and this week’s Treasury market activity suggests they could set new records in the next set of reports.
The 30-year mortgage was down 5 basis points from last week to average 3.94 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Dec. 15. That was the lowest level ever recorded by Freddie for the 30 year fixed-rate mortgage, which was also a record 3.94 percent in the week ended Oct. 6. The 30-year averaged 4.83 percent in the same week last year.
The survey from Freddie is conducted on 125 mortgage lenders each week between Monday and Wednesday. The 10-year Treasury note yield averaged 1.97 percent for those three days this week versus the 1.92 percent the yield closed at Thursday based on statistics reported by the Department of the Treasury. The trend suggests mortgage rates could be 5 BPS better in next week’s report.
But no change in mortgage rates was forecasted by a majority of panelists surveyed by Bankrate.com for the week Dec. 15 to Dec. 21. A quarter, however, predicted a decline of at least 3 BPS over the next week, while 19 percent projected an increase.
Freddie expects that 30-year mortgages will rise 20 BPS each quarter through the end of next year from 4.0 percent this quarter.
Jumbo borrowers paid a 69-basis-point premium over conforming borrowers in the U.S. Mortgage Market Index report from Mortech Inc. and MortgageDaily.com for the week ended Dec. 9. The jumbo-conforming spread worsened from 66Â BPS the prior week but improved from 75 BPS during the same week in 2010.
The average 15 year fell to the lowest level ever recorded: 3.21 percent. Freddie said that the 15 year was 3.27 percent in last week’s survey. Fifteen-year loans were priced 73 BPS better than 30-year loans this week, a slightly bigger discount than 72 BPS in the prior report.
At a record-low 2.86 percent, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage was 7 BPS less than the previous report from Freddie.
The one-year, Treasury-indexed ARM averaged 2.81 percent in Freddie’s survey, 1 basis point more than last week. The one year was 3.35 percent at this point in 2010.
Freddie has the one-year ARM at 2.9 percent in the fourth-quarter 2011 and at 3.0 percent during each quarter of next year.
Like the one-year ARM, the underlying index — the yield on the one-year Treasury note — was higher this week, rising to 0.12 percent as of today’s market close from 0.10 percent last Thursday, according to statistics from the Treasury Department.
It was another rough week for ARM borrowers whose rates are adjusted based on the six-month London Interbank Offered Rate. Bankrate.com reported LIBOR at 0.77 percent as of Wednesday, inching up from 0.76 percent a week earlier and up each week since Sept. 14, when the index was 0.50 percent.
ARM share of loan inquiries in the Mortgage Market Index report climbed to 6.16 percent from 5.94 percent in the previous report.
ARM share of loan production during all of next year is not expected by Freddie to vary from the 13 percent share as of this quarter.
The cost of funds rate for federally regulated thrifts fell to 1.22 percent in October from 1.25 in September, the Office of the Comptroller of the Currency reported. The rate was 1.62 in October 2010.
