Mortgage rates continued their trek further into record territory — prompting an increase in new activity. One indicator suggests mortgage rates will be even lower in the next set of reports.
It was a new record low for the 30-year fixed-rate mortgage, which Freddie Mac reported at 4.44 percent in its Primary Mortgage Market Survey for the week ended Aug. 12. The 30-year was 4.49 percent a week earlier and 5.29 percent 52 weeks earlier.
The conventional 30-year fell to 4.355 percent in the Mortech-MortgageDaily.com Mortgage Market Index for the week ended Aug. 11 from 4.414 percent the prior week. The jumbo 30-year, meanwhile, was down 6 basis points to 5.26 percent.
In its August 2010 Economic and Housing Market Outlook, Freddie predicted that the 30-year will average 4.6 percent this quarter, rise to 4.7 percent in the fourth quarter and continuing rising through 2012 to 5.7 percent.
An indication of where mortgage rates are headed in the short term, the yield on the 10-year Treasury bond, closed yesterday at 2.74 percent, tumbling 20 BPS from last week, according to data from the U.S. Department of the Treasury. The movement suggests mortgage rates could come in 10 to 15 BPS lower in next week’s reports.
But nearly half of the panelists surveyed by Bankrate.com for the week Aug. 12 to Aug. 18 see no changes ahead for mortgage rates. Rates will decline at least 3 BPS during the next week according to 40 percent, and 13 percent predicted an increase.
The average 15-year fixed-rate mortgage fell to a record-low 3.92 percent from 3.95 percent in Freddie’s prior survey.
Freddie Mac Chief Economist Frank Nothaft explained in the survey that rates fell as the government reported a sluggish job market.
Tumbling 7 basis point from the prior week, the five-year Treasury-indexed hybrid adjustable-rate mortgage came in at 3.56 percent in Freddie’s survey.
Trimming 2 BPS off of its average for the week, Freddie said the one-year Treasury-indexed ARM was 3.53 percent. A year ago, the one-year averaged 4.72 percent. Freddie predicted the average one-year will be 3.7 percent for the rest of this year, then slowly rise to 4.1 percent by the end of next year.
The index for the one-year ARM, the yield on the one-year Treasury bill, closed Thursday at 0.25 percent, eking out a decline from 0.27 percent last Thursday. Another ARM index, the six-month London Interbank Offered Rate, was 0.62 percent Wednesday, falling from 0.65 percent seven days prior.
Third- and fourth-quarter ARM share in Freddie’s outlook is forecasted to be 6 percent. Next year, ARM share will steadily rise to 10 percent by the fourth quarter.
The Mortgage Bankers Association reported in its Weekly Mortgage Applications Survey for the week ended Aug. 6 that ARM share increased to 5.9 percent from the prior week’s 5.4 percent share.
Mortgage activity improved this week, with the Mortgage Market Index increasing to 325 from 313 in the week ended Aug. 4. The average U.S. loan amount in the report was $216,618, higher than the previous week’s $216,033. Washington, D.C.’s, $282,230 was higher than any state, and South Dakota’s $147,209 was lowest.
While the Mortgage Market Index reflects new loan activity for mortgage brokers this week, MBA’s report reflects last week’s new applications taken by mortgage bankers. MBA said overall activity was up 1 percent from the previous week on a seasonally adjusted basis, with purchase and refinance activity each edging up less than a percent.
Refinance activity accounted for 62 percent of activity in this week’s Mortech-MortgageDaily.com report, inching up from 60 percent last week. This latest reading reflected a 48 percent rate-term share and a 14 percent cashout share.
Freddie projected that the refinance share of applications will be three-quarters during the third quarter, then fall to 60 percent in the fourth quarter and hang just above a third through most of next year.
