The spread between the 15-year and 30-year fixed-rate mortgage has not been this wide for more than a year. Reflecting last week's improvement in rates, 1003 applications improved..
Up 4 basis points from last week, the average 30-year fixed-rate mortgage was 5.42 in Freddie Mac's Primary Mortgage Market Survey for the week ended June 25. The 30-year was 1.03% better than the same week during 2008.
The Federal Housing Finance Agency, which regulates and currently operates Freddie, reported today that the 30-year averaged 4.88% in May, 0.01% higher than April.
In its June 2009 Economic and Housing Market Outlook, Freddie predicted the 30-year will average 4.9% this quarter and 5.3% in the third quarter and fourth quarter.
The average 15-year fixed-rate mortgage fared much better in Freddie's weekly survey, easing 2 BPS to 4.87%. The spread between the 15-year and the 30-year -- at 0.55% -- is at its highest level since March 20, 2008, when it stood at 0.60%. FHFA reported that the 15-year decreased to 4.71% in May from April's 4.75%.
The yield on the 10-year Treasury bond, a barometer for fixed-mortgage rates, was 3.660% near noon, tumbling from 3.816% last week.
Less than half of the 100 panelists surveyed by Bankrate.com for the week June 25 to July 1 predicted a decrease of at least 3 BPS in mortgage rates over the next 35 to 45 days. Just under a third forecasted no change, while nearly a quarter expected an increase.
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.99% in Freddie's latest survey, 2 BPS higher than last week.
But Freddie reported that the one-year Treasury-indexed ARM average declined 2 BPS to 4.93%. Freddie projects that the one-year will average 4.8% in the second and third quarters, then rise to 4.9% in the fourth quarter.
The yield on the one-year Treasury bill, which serves as the index for the one-year ARM, closed yesterday at 0.50%, unchanged from seven days earlier. The yield on the six-month London Interbank Offered Rate -- the index used for a big share of subprime ARMs -- was 1.15% as of yesterday, Bankrate.com reported. LIBOR yielded 1.16% a week earlier.
Despite the decline in the ARM indices and in the average one-year ARM, the share of applications for ARMs eased to 4.1% in the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending June 19 from the prior week's 4.3%. The ARM share will only be 2% this quarter, where it will stay through the end of the year, according to Freddie's forecast.
Loan applications increased 7% on a seasonally adjusted basis in MBA's survey, bringing its Market Composite Index to 548.2. The improvement reflects last week's decline in mortgage rates and was driven by a 7% increase in purchase activity.
Refinance activity was also higher in MBA's survey, increasing 6%. But the refinance share was unchanged at 54%. Freddie predicted the second-quarter refinance share will come in a 71% and fall to 51% within a year.
In its revised origination outlook for 2009 released this week, MBA lowered projected refinance originations to $1.297 trillion from $1.960 trillion in its March projection. The trade group cited a spike in mortgage rates during May and lackluster results from the Obama administration's Home Affordable Refinance Program.