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| The Federal Reserve’s plan to acquire agency mortgage-backed securities has already cut the spread between mortgage rates and comparable Treasury yields by 36 basis points and pushed the 30-year yield to its lowest level on record.
The average 30-year fixed-rate mortgage dropped 9 BPS from the prior week to 5.01% in Freddie Mac’s Primary Mortgage Market Survey for the week ending today. The 30-year averaged 5.87% a year ago and has never been this low since Freddie started tracking mortgage rates in 1971. The decline in the 30-year rate came despite a 27 BPS increase in the 10-year Treasury yield since last week. The narrowing spread between the 10-year yield — which stood at 2.470% near midday — and the 30-year mortgage rate reflected the Federal Reserve’s implementation of a plan to purchase up to $500 billion in mortgage-backed securities issued by or guaranteed by Freddie, Fannie Mae and Ginnie Mae. Freddie’s chief economist, Frank Nothaft, noted that around $4.7 trillion in agency MBS were outstanding as of Sept. 30. The average 15-year fixed-rate mortgage was 4.62%, tumbling 21 BPS from seven days earlier. A plurality of the panelists surveyed by Bankrate.com for the week Jan. 8 to Jan. 14 expect rates to decline further, with 42% projecting at least a 3 BPS decrease over the next 35 to 45 days. One-third forecasted an increase in mortgage rates, while one-quarter saw no changes ahead. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.49% in Freddie’s latest survey, off 8 BPS from the previous week. Freddie said the average one-year Treasury-indexed ARM was 4.95%, increasing 0.10% from a week earlier. The underlying index, the one-year Treasury yield, closed yesterday at 0.44%, higher than 0.37% seven days earlier, according to data reported by the U.S. Department of the Treasury. The six-month London Interbank Offered Rate was 1.77% as of yesterday, Bankrate.com reported. LIBOR edged lower from 1.78% a week ago. Less than 1% of borrowers applying for mortgages were considering ARMs, the Mortgage Bankers Association reported in its Weekly Mortgage Applications Survey for the week ending Jan. 2. MBA said overall applications contracted 8% on a seasonally adjusted basis from the previous week, leaving its Market Composite Index at 1143.8. The decline came despite a 7% increase in purchase applications and a 19% increase in government applications because of a 12% contraction in refinance applications. Refinances accounted for 80% of total applications tracked by MBA, down from 83% a week prior. |
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Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com. e-mail:Â mtgsam@aol.com |
