|Mortgage rates headed further into record territory this past week, keeping loan application activity near an all-time high.
Fixed rates saw the steepest decline, with the average thirty-year falling 0.07% -- or seven basis points (BPS) -- from last week to 6.15%, according to Freddie Mac's survey of thrifts, commercial banks and mortgage lending companies. Freddie said this is the lowest the thirty-year has been since it began tracking rates in 1971. A year ago, the average thirty-year was at 6.89%.
"Looking for safety from the current uneasiness in domestic and foreign markets, nervous investors pumped their money into the US Treasury bond market causing yields to fall to record levels," said Freddie's chief economist Frank Nothaft. "Mortgage rates followed, dropping to yet another historic low."
The average fifteen-year fixed rate mortgage fell to 5.56%, according to Freddie, eight BPS lower than the prior week. The 15-year is at its lowest point since Freddie began tracking it in 1991. The bigger drop in the fifteen-year pushed the spread between the 15-year and 30-year to 59 BPS.
Phil Colling, economist for the Mortgage Bankers Association of America (MBA), said current rates are comparable to those of 1963.
The one-year adjustable rate mortgage (ARM) edged up one BPS to 4.35%, Freddie said, bringing the spread between the ARM and the 30-year fixed rate to 1.80% from as much as 2.14% during April. ARM applications represented 12.4% of total applications, down from 13.8% last week and as much as 18.8% during July.
Loan applications remain within seven percent of their all-time high. The MBA reported in its survey of mortgage bankers, commercial banks and thrifts that total loan applications were down nearly 2 percent from last week. With record low mortgage rates this week, next week's reported application activity is likely to strengthen.
"The refinancing wave of the last six weeks is now on pace to eclipse the unprecedented refinancing activity that we saw last October and November," said MBA's Colling.
While purchase applications jumped more than four percent, applications for refinance were down more than four percent. Refinances represented about 71% of total applications, down from more than 72% last week.
Mortgage experts surveyed by Bankrate.com are mixed in their outlook, with 45% expecting rates to fall and one-third expecting no change. Bankrate.com's financial analyst said, "one thing is for sure, mortgage rates are headed for another drop this week."
MBA's Colling added, "since the yield on 10-year Treasury notes dropped again yesterday (Tuesday) it is possible that mortgage rates could drop again this week."
The 10-year Treasury-note was trading down 27/32 during early afternoon trading to yield 4.03% according to Lioninc.com. The yield, which had fallen below four percent this week, was reported at 4.13% near midday last Friday.