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30-Year Cracks 5%

30-year average 4.96%

January 15, 2009

By MortgageDaily.com staff

The 30-year fell below five percent for the first time in at least 37 years. At the same time, adjustable-rate mortgage yields are heading higher than fixed rates. Refinance applications surged, but purchase and government activity were both down.

Freddie Mac reported in its survey of 125 thrifts, commercial banks and mortgage lenders for the week ending Jan. 15 that the 30-year fixed-rate mortgage averaged 4.96%, falling from 5.01% a week prior. A year earlier, the 30-year stood at 5.69%.

"The 30-year fixed-rate mortgage has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971," the announcement stated.

Freddie's Chief Economist Frank Nothaft explained that a slowing economy and government actions helped push the 30-year down for the 11th consecutive week. He noted that $100 billion has already been injected into the mortgage market by the Federal Reserve and U.S. Department of the Treasury, and another $570 billion may be utilized this year to further stimulate the mortgage market.

The average 15-year fixed-rate mortgage was 4.65% in the latest survey, rising from 4.62% seven days earlier.

The yield on the 10-year Treasury was 2.222% near midday, falling from around 2.470% last Thursday. While fixed rates tend to move with the 10-year yield -- the Fed's recent purchases of mortgage securities had the 30-year fixed-rate falling last week even as the 10-year yield increased.

Nearly half -- 46% -- of the 100 mortgage bankers, mortgage brokers and other "experts" surveyed by Bankrate.com for the week Jan. 15 to Jan. 21 predicted rates will remain within 2 BPS of their current levels during the next 35 to 45 days. Nearly one-third -- 31% -- forecasted a decrease, and 23% projected rates will head higher.

The five-year Treasury-indexed hybrid ARM averaged 5.25% this week, lower than 5.49% the previous week.

The one-year Treasury-indexed ARM came in at 4.89%, down from 4.95% a week prior. The index for the one-year ARM -- the yield on the one-year Treasury itself -- was 0.42% yesterday, not far from the 0.44% it stood at a week earlier.

The six-month London Interbank Offered Rate, which is also used as an index for ARMs, was 1.47% yesterday, according to Bankrate.com. LIBOR was 30 BPS higher the prior Wednesday.

In its Weekly Mortgage Applications Survey for the week ending Jan. 9, the Mortgage Bankers Association said ARMs accounted for 1% of total applications, nudging fractionally higher than the prior week.

Across-the-board, MBA said 1003 activity was up 16% from the prior week on a seasonally adjusted basis, bringing its Market Composite Index to 1324.8. The increase was driven by a 26% jump in refinance applications -- which accounted for 85% of total applications compared to 80% the prior week.

Purchase applications, meanwhile, were down 14% and government activity fell 22%, according MBA.

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