For seven weeks now, mortgage rates have been teasing originators and consumers alike about the prospect of financing at the lowest rates since last year's record lows. While rates are likely to hold steady as of today, tomorrow's employment report could spark volatility in the bond market and move mortgage rates in the process.
The average 30-year loan applicant got a fixed rate of 4.55 percent based on Freddie Mac's Primary Mortgage Market Survey for the week ended June 2. The 30-year was less than the 4.60 percent a week prior, below the 4.79 percent a year prior and lower than it's been since the week ended Dec. 2, 2010 -- when the average was 4.46 percent.
The all-time low for the 30-year was 4.17 percent for the week ended Nov. 11, 2010.
Concerns that a weak economy could persist placed downward pressure on mortgages rates, according to Freddie's chief economist, Frank Nothaft. Worries about the housing market were also a factor with the S&P/Case-Shiller National Home Price Index falling 5.1 percent between the first-quarter 2010 and the first-quarter 2010. It was the biggest annual decline since the third-quarter 2009.
The 10-year Treasury yield was 3.03 percent during trading today, while it yielded 3.07 percent last Thursday, according to data from the Department of the Treasury and the Wall Street Journal. Given that mortgage rates moved about the same amount as the 10-year -- originators might not see much difference in next week's survey.
A majority of panelists who were surveyed by Bankrate.com for the week June 2 to June 8 agreed with the outlook rates won't venture far from their current levels. Another 40 percent predicted a decline of at least 3 BPS over the next week, and just 7 percent forecasted an increase.
But the volatility that has recently haunted the markets and herded investors into safe U.S. Treasuries could be exacerbated by a worse-than-expected employment report tomorrow.
Borrowers on mortgages in excess of $417,000 saw a big improvement in jumbo pricing, based on data from the U.S. Mortgage Market Index report for the week ended May 27 from Mortech Inc. and MortgageDaily.com. The spread between the conforming and jumbo 30-year mortgages sank to just 36 BPS from the previous week's 55 BPS.
A four-basis-point weekly drop was recorded by Freddie for the average 15-year fixed-rate mortgage, which came in at 3.74 percent this week. The spread between the 15-year and the 30-year was 81 BPS this week, less than last week's 82 BPS.
No weekly change was reported by Freddie for the five-year, hybrid, Treasury-indexed, adjustable-rate mortgage, which averaged 3.41 percent.
At 3.13 percent, the one-year Treasury-indexed ARM was 2 BPS worse than in Freddie's prior survey. But the one-year was significantly lower than the 3.95 percent during the same week a year ago.
Unchanged over the prior week, the one-year Treasury yield was 0.18 percent Wednesday based on Treasury Department data. Another ARM index, the six-month LIBOR, eased to 0.40 percent as of yesterday from 0.41 percent seven days prior, Bankrate.com reported.
ARM share strengthened to 10.01 percent from 9.97 percent in the Mortgage Market Index report, though ARM inquiries were still 4 percent lower.