Mortgage rates fell to the lowest levels on record, and signs point to a further decline. Fifteen-year loans were less attractive this week, but the jumbo spread was better.
At 4.12 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Sept. 8, the average 30-year fixed-rate mortgage broke the 4.15 percent record set the week ended Aug. 18. The 30-year averaged 4.22 percent seven days earlier and 4.35 percent a year earlier.
Freddie Mac Chief Economist Frank Nothaft explained that factors helping to drive down interest rates included market concerns over Eurozone sovereign debt default, a weak U.S. employment report and a bleak regional economic review report from the Federal Reserve.
The Department of the Treasury reported that the yield on the 10-year Treasury note, a benchmark for mortgage rates, closed last Thursday at 2.15 percent. Market data today from WSJ.com indicated that the 10-year was yielding around 2.00 percent — indicating that rates could have more room to decline by next week’s reports. But lenders have been holding back on cutting mortgage rates relative to their costs, so any decline in mortgage rates is likely to be moderated.
But no changes were expected by a plurality of panelists surveyed by Bankrate.com for the week Sept. 8 to Sept. 14, with 38 percent predicting that rates will remain within 2 BPS of this week levels during the next week or so. The rest were evenly split about whether rates would rise or fall.
The jumbo 30 year was priced 63 basis points higher than the conforming 30 year in the U.S. Mortgage Market Index report for the week ended Sept. 2 from Mortech Inc. and MortgageDaily.com. Jumbo pricing was better than the previous week, when the spread was 65 BPS.
Also falling to a record-low was the average 15-year fixed-rate, which was 3.33 percent this week versus 3.39 percent in the prior report, according to Freddie. The difference between a 15-year mortgage and a 30-year mortgage was 79 BPS this week, lower than last week’s 83 BPS. The narrowing spread made the 15 year less attractive.
Freddie said that the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 2.96 percent in the latest survey, unchanged from last week. While it wasn’t lower, it was still a record for the 5/1 ARM.
The one-year Treasury-indexed ARM fell to a record 2.84 percent from 2.89 percent. The one-year was 3.46 percent during the same week in 2010.
Despite the record-breaking one-year quote, the underlying yield on the one-year Treasury note inched up to 0.11 percent yesterday from 0.10 percent the prior Wednesday based on Treasury Department data.
Another ARM index, the six-month London Interbank Offered Rate, was 0.50 percent as of Wednesday, Bankrate.com reported. LIBOR rose from 0.48 percent a week earlier.
Ginnie Mae issued a bulletin last week indicating that the British Bankers’ Association made changes to the way LIBOR is calculated. The revised methodology is based on rates quoted by 19 BBA designated banks and is “calculated by eliminating the five highest and five lowest bank rates, averaging the nine remaining rates, carrying the result out to six decimal places and rounding to five decimal places.”
ARM share rose to 7.10 percent in the latest Mortgage Market Index report, higher than the previous week’s 6.82 percent.
