It was a mixed bag for mortgage rates this week as fixed rates and the hybrid adjustable-rate mortgage moved lower and the one-year ARM ascended. Some signs point to even lower fixed rates next week.
Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Thursday that the average 30-year fixed-rate mortgage fell 5 basis points from the previous report to 5.0 percent. During the same week last year, the 30-year was lower at 4.93 percent.
The secondary lender, in its February 2011 Economic and Housing Market Outlook, predicted that the 30-year will average 5.0 percent this quarter and rise to 5.5 percent by the end of this year.
The spread between the conforming 30-year and the jumbo 30-year was 66 BPS in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Wednesday. The jumbo-conforming spread was unchanged from last week but much lower than 113 BPS the same week in 2010.
An indication of where mortgage rates are moving, the yield on the 10-year Treasury, fell from 3.70 percent at the close of the markets last Thursday to 3.57 percent during trading today, according to data published by the Department of the Treasury and WSJ.com. The activity suggests mortgage rates might be at least 5 BPS better in next week’s reports.
But don’t bet on interest rates dropping during the next week based on the panelists at Bankrate.com for the week Feb. 17 to Feb. 23; almost two-thirds predicted no change, 22 percent expected an increase of at least 3 BPS and 14 percent forecasted falling rates.
Freddie reported the average 15-year fixed-rate mortgage at 4.27 percent — 2 BPS below a week ago. The spread between the 15-year and the 30-year thinned to 73 BPS this week from 76 BPS seven days earlier.
In its fourth-quarter refinance report, Freddie said that nearly one-third of borrowers who refinanced a 30-year mortgage moved into a 15- or 20-year mortgage. It was “the highest such share since the first quarter of 2004.”
Down 5 BPS over the prior week, the five-year Treasury-indexed ARM was 3.87 percent in Freddie’s report.
The one-year Treasury-indexed ARM took an alternative path and climbed — averaging 3.39 percent this week versus 3.35 percent a year ago, according to Freddie. But the one-year ARM was still better than 4.23 percent a year earlier.
Freddie expects the one-year to average 3.3 percent during the first-half 2011 and 3.4 percent in the second half.
The index for the one-year ARM, the yield on the one-year Treasury, inched down to 0.29 percent Wednesday from 0.30 percent a week earlier, according to the Treasury Department.
Another ARM index, the six-month London Interbank Offered Rate, was 0.47 percent this week, Bankrate.com reported. LIBOR was 0.46 percent last week.
ARM share was 9.5 percent in the latest Mortgage Market Index report.
