Adjustable rates fell but still sit higher than fixed rates, which rose. A widening spread between 15-year and 30-year fixed rates is making the 15-year more attractive. Refinances continue to drive 1003 activity.
Up 2 basis points from the prior week, the average 30-year fixed-rate mortgage was 4.86% in Freddie Mac's Primary Mortgage Market Survey for the week ending today. The 30-year was 115 BPS lower, however, than a year ago.
The 15-year edged up 1 basis point from last week to 4.52%, Freddie said. The spread between the 30-year and the 15-year, which had fallen to 26 BPS in the week ending April 2, has widened to 34 BPS -- making the 15-year a more attractive option for prospective borrowers.
The yield on the 10-year Treasury was 3.131% near midday, easing from around 3.245% seven days earlier and suggesting fixed-rates could be lower in next week's survey.
A plurality -- 42% -- of panelists surveyed by Bankrate.com for the week May 14 to May 20 see no changes ahead for mortgages rates. The rest were evenly split over whether rates will rise or fall at least 3 BPS during the next 35 to 45 days.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.82% in Freddie's survey, 8 BPS better the seven days earlier.
The one-year Treasury-indexed ARM averaged 4.71%, 7 BPS better, according to Freddie. The yield on the one-year Treasury bill, which determines rate adjustments on the one-year ARM, was 0.52% yesterday, 0.01% higher than a week prior, according to data reported by the U.S. Department of the Treasury.
Bankrate.com reported that the six-month London Interbank Offered Rate, which is the ARM index on many subprime loans, was 1.43% yesterday. A week earlier, LIBOR was reported at 1.54%.
Just 2.3 percent of new mortgage applicants opted for an ARM in the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending May 8. With fixed rates lower than ARMs, it would only make sense to go with an ARM if the borrower believes mortgage rates will fall from their near-record lows now.
MBA said new applications for mortgages declined 9% on a seasonally adjusted basis, leaving its Market Composite Index at 895.6. The decrease came despite a 1% increase in purchase applications and was driven by an 11% decline in refinance applications. Refinances accounted for 72% of applications during the latest week, falling from 74% a week earlier.