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| For the fourth straight week, the margin between the 1-year Treasury-indexed adjustable-rate mortgage and the 30-year fixed rate continued widening — making ARMs more attractive and pushing the share of variable-rate loan applications higher.
The 30-year fixed-rate mortgage averaged 6.69%, sliding 5 basis points from the level a week ago, which was the highest in almost a year, according to Freddie Mac’s latest Primary Mortgage Market Survey. At this time a year earlier, the 30-year averaged 6.71%. “Mortgage rates eased this week due to market concerns that the housing market will be a longer drag on the economy,” Freddie’s announcement read. Of the 100 mortgage “experts” surveyed by Bankrate.com this week, just over half said rates will head down over the next month and a half or so and just under half forecast they’s stay relatively unchanged. In a longer-term outlook released yesterday, the Mortgage Bankers Association predicted the 30-year’s average of 6.4% this quarter will be at 6.7% next quarter and throughout 2008. The 10-year Treasury yield was trading at 5.14% near midday, 7 BPS lower than last Thursday. The averages for both the 15-year fixed-rate and the 5-year Treasury-indexed hybrid ARM reportedly fell by 6 BPS over the past week to 6.37% and 6.31%, respectively. Freddie said the largest weekly downturn — 9 BPS to 5.66% — was seen in the average 1-year Treasury-indexed ARM, while the Federal Reserve reported the 1-year T-bill itself fell by the same amount to 4.92% Tuesday. The difference between the 1-year ARM and the 30-year fixed rate, currently at 103 BPS, has widened each week since May 24, when it stood at 73 BPS. MBA said it expects the 1-year ARM will average 5.5% for the remainder of the year. And the share of ARM applications — which have also risen each week since May 24 — edged up during the week ending June 15 to account for about one-fifth of all mortgage requests, MBA reported on Wednesday. Overall, originators completed 3 percent fewer mortgage requests than in the prior week as refinance demand fell by 4 percent and purchase money application activity edged down 3 percent, MBA added. Nonetheless, the reported share of refinance applications was unchanged from the previous week at 38 percent. |
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