Rates fell this week as the 15-year became a more attractive option.
The average 30-year fixed-rate mortgage, at 4.76 percent, tumbled 12 basis points from the prior report in Freddie Mac’s survey of 125 mortgage lenders for the week ended Thursday. The 30-year was 20 BPS better than the same week in 2010.
The secondary lender’s chief economist, Frank Nothaft, said investors rushed to the security of U.S. Treasury bonds, pulling down bond yields and mortgages rates.
In next week’s report, the 30-year is likely to about the same based on 10-year Treasury activity. The 10-year yield was 3.26 percent during trading today, lower than 3.37 percent a week ago, according to the Department of the Treasury and WSJ.com. The 11-basis-point decline was not much different than the 30-year mortgage’s 12-basis-point decline.
A drop of at least 3 BPS was predicted by a majority of panelists surveyed by Bankrate.com for the week March 17 to March 23, while a third saw no changes ahead during the next week and 14 percent forecasted a rise.
In its latest economic outlook, Freddie predicted that the 30-year will average 4.9 percent in the first quarter, then rise each quarter to end next year at 6.2 percent. The Mortgage Bankers Association projects that the 30-year will average 5.0 percent for the first half of 2011 then climb each quarter to end next year at 6.2 percent — the same as MBA’s projection.
Freddie reported the average 15-year fixed-rate mortgage at 3.97 percent, 18 BPS below last Thursday. The spread between the 30-year and the 15-year was 79 BPS, widening from 73 BPS last week and making the 15-year a better option.
Falling 16 BPS from seven days earlier in Freddie’s survey, the five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.57 percent this week.
But the one-year Treasury-indexed ARM averaged just 4 BPS less than last week, coming in at 3.17 percent this week. However, the one-year was well below 4.12 percent 12 months ago. Freddie expects the one-year to average 3.3 percent in the first half of 2011.
The one-year ARMÂ index, the yield on the one-year Treasury, closed Wednesday at 0.21 percent, lower than 0.26 percent a week earlier, based on Treasury Department data. The six-month LIBOR was unchanged at 0.46 percent.
ARM inquiries in the U.S. Mortgage Market Index report from Mortech Inc. and MortgageDaily.com for the week ended March 11 inched higher, with the ARM MMIÂ rising to 20 from the previous week’s 19. ARMÂ share, meanwhile, edged up to 9.49 percent from 9.26 percent the prior week.
ARM share is forecasted in Freddie’s report to move from 5 percent in the first quarter to 6 percent in the second quarter and reach 11 percent by the end of 2012. MBAÂ says ARM share will average 6 percent this quarter then climb to 7 percent — where it will stay through the end of next year.
Refinance share in the latest MMIÂ report was a little less than 48 percent, mostly unchanged from a little more than 48 percent in the prior report.
Freddie said that the refinance share of applications will be a little more than two -thirds this quarter, then fall off to 60 percent in the second quarter. MBA has first-quarter refinance share at 63 percent or originations, with the share falling to a quarter by September and staying there until at least the final period of next year.
