Mortgage rates fell and signs point to a further decline. But prospective jumbo borrowers aren’t participating in the rally.
The regulator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency, reported that the average 30-year was 4.61 percent in December, 23 BPS worse than November.
More recently, it was a 5-basis-point weekly dip for the 30-year, which averaged 4.95 percent in Freddie’s survey of 125 of its sellers for the week ended Thursday. The 30-year was also better than 5.05 percent a year ago.
“Fixed mortgage rates eased again this holiday week amid mixed inflation data reports,” Freddie’s Frank Nothaft explained in the report. “Although the core consumer price index for January rose slightly above the market consensus, house prices fell 4.1 percent in the fourth quarter of 2010 compared to the same period in 2009, according to the S&P/Case-Shiller® National Index.”
Nothaft, who is chief economist for the secondary lender, added that the index was at its lowest level since the fourth quarter of 2002.
What Nothaft didn’t mention was the spreading crisis in the Mideast and the recent escalation in Libya. As speculation rises about the potential impact to financial markets — U.S. stock prices have been declining, oil prices have been surging and Treasury yields have been falling.
A week ago, when the 30-year was 5.0 percent, the benchmark 10-year Treasury yield sat at 3.58 percent, based on data reported by the Department of the Treasury. Today, the 10-year is trading at around 3.43 percent, according to WSJ.com, suggesting that the 30-year mortgage has another 10 BPS lower to go by next week’s survey from Freddie.
Half of the panelists surveyed by Bankrate.com for the week Feb. 24 to March 3 agreed that rates will fall. No change was predicted by 37 percent, and 13 percent projected an increase of at least 3 BPS during the next week.
In the latest forecast from the Mortgage Bankers Association, the 30-year is predicted to be 5.2 percent this quarter, then rise to 5.5 percent in the second quarter.
The jumbo-conforming spread, the difference between the interest rates for 30-year fixed-mortgages that are above and below $417,000, shot up to 73 BPS in the U.S. Mortgage Market Index report for the week ended Wednesday from 66 BPS a week earlier.
Freddie also reported a 5-basis-point decline from last week for the average 15-year fixed-rate mortgage, which came in at 4.22 percent. The spread between the 15-year and the 30-year was unchanged at 73 BPS.
Improving 7 BPS from the prior report, Freddie said the five-year Treasury-indexed adjustable-rate mortgage was 3.80 percent.
Bucking the weekly trend was the one-year Treasury-indexed ARM, which Freddie reported at 3.40 percent. But the one-year was still better than 4.15 percent during the same week in 2010. At 0.27 percent, the underlying index, the yield on the one-year Treasury, was 2 BPSÂ better yesterday than last Wednesday, the Treasury Department data indicated.
Another ARM index, the six-month LIBOR, was 0.47 percent Wednesday, the same as the prior week, Bankrate.com reported.
In the Mortgage Market Index report, ARMÂ share was unchanged from last week at 9.5 percent.
MBA’s forecast has first-quarter ARM share at 6 percent — though based on its weekly forecast, the share has been trending below 6 percent for a while. Second-quarter ARM share is predicted to come it at 7 percent — where it will stay through the end of next year.
Refinance share, according to MBA’s forecast, will drop from the fourth-quarter 2010’s 78 percent to 63 percent this quarter and bottom out by the end of September at around a quarter, where it will remain until at least the end of 2012.
