Both government-sponsored housing enterprises predict a drop in refinance originations and an increase in the share of borrowers who opt for an adjustable rate. Refinances have already begun dragging down new business as rates lurch higher.
Jumping 22 basis points from last week, the average 30-year fixed-rate mortgage was 4.39 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday. The 30-year was 4.83 percent a year ago.
“Retail sales rose by nearly twice the consensus in October and represented the strongest gain since March,” Freddie Chief Economist Frank Nothaft explained about the increase in the report. “Moreover, consumer sentiment, as measured by the University of Michigan, ticked up in November to the highest level since June.”
In its monthly forecast, Fannie Mae predicted the 30-year will average 4.3 percent this quarter and during the first half of next year. Freddie’s latest forecast has the 30-year moving from 4.2 percent in the fourth quarter to 4.3 percent in the first-quarter 2011.
Based on the 10-year Treasury yield, which the Department of the Treasury reported closed at 2.90 percent today versus 2.65 percent as of last Thursday, mortgage rates aren’t likely to be much different in next week’s reports.
Exactly half of Bankrate.com’s panelists for the week Nov. 18 to Nov. 24 have rates staying within 2 BPS of their currently level over the next week. An up tick was forecasted by 36 percent and the other 14 percent projected a decline.
The spread between the jumbo 30-year fixed-rate mortgage and the conforming 30-year fell to 87 BPS from the previous week’s 89 BPS in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Wednesday.
Similar to the 30-year, the average 15-year fixed-rate mortgage was 19 BPS worse than last week at 3.76 percent in Freddie’s survey.
A 15-basis-point increase was recorded for the five-year Treasury-indexed hybrid adjustable-rate mortgage, which averaged 3.40 percent in Freddie’s report.
At 3.26 percent, there was no weekly change in the one-year Treasury-indexed ARM, according to Freddie. The one-year was 4.35 percent a year ago.
Fannie has the one-year average falling from 3.4 percent this quarter to 3.2 percent during the first half of 2011, while Freddie expects the one-year to rise from 3.4 percent this quarter to 3.5 percent in the first six months of next year.
The Treasury reported that the index for the one-year ARM, the yield on the one-year Treasury, edged up to 0.26 percent at the market’s close today from 0.24 percent a week earlier.
After being frozen for four weeks at 0.45 percent, the six-month LIBOR was 0.44 percent Wednesday, Bankrate.com reported.
The Mortgage Bankers Association reported in its Weekly Mortgage Applications Survey for the week ended Nov. 12 that ARM share was unchanged from the prior week at 5.3 percent.
ARM share of applications, according to Fannie, will rise from 6 percent this quarter to 7 percent in the first-quarter 2011 then continue rising through 2012 to 14 percent. Freddie forecasts the ARM share of originations will be 6 percent this quarter and steadily rise to 10 percent by the final quarter of next year.
Mortgage activity fell 6 percent according to the Mortgage Market Index — which declined to 291 from 311 last week. The report indicated that the deterioration was the result of refinance activity, with refinance share falling to 57 percent from 61 percent.
Freddie expects refinance share of applications to be 70 percent in the final quarter of 2010, then fall to 55 percent in the first quarter. Fannie predicts the refinance share of originations will decline from 73 percent during the fourth quarter to 64 percent in the first three months of next year.
MBA said last week’s application activity fell 14 percent on a seasonally adjusted basis from the previous week, with refinances down 17 percent.
