Mortgage Rates Sink to 10-Month Low, Could Go Lower

Freddie Mac reported that 30-year fixed rates on residential loans averaged 3.65 percent during the week that ended on Feb. 11.

The 30-year average, along with other fixed and adjustable rates, were reported
in its weekly Primary Mortgage Market Survey.

The last time 30-year fixed rates were this low was in the week ended April 23, 2015.

Compared to a week earlier, 30-year rates were down seven basis points — the sixth consecutive weekly decline. The year-over-year drop was four BPS.

A Mortgage Daily analysis of Treasury market activity suggests that fixed rates could be around 10 BPS lower in Freddie’s next survey.

“In a falling rate environment, mortgage rates often adjust more slowly than capital market rates, and the early-2016 flight-to-quality has run true to form,” Freddie Mac Chief Economist Sean Becketti explained in Freddie’s report. “The 30-year mortgage rate has dropped 36 basis points since the start of the year, while the yield on the 10-year Treasury has dropped 59 basis points over the same period. 

“If Treasury yields were to hold at current levels, mortgage rates might well sink a little further before stabilizing.”

Rates are expected by 60 percent of panelists surveyed by Bankrate.com for the week Feb. 11 to Feb. 17 to fall at least another three BPS over the next week. The remaining panelists were evenly divided over whether rates would rise or stay put.

Freddie’s survey had 15-year fixed rates averaging 2.95 percent, down six BPS from the week ended Feb. 4. Fifteen-year rates were
70 BPS better than 30-year rates, narrowing from a spread of 71 BPS in the prior report.

At 2.83 percent, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage was two BPS lower than in Freddie’s last survey.

One-year Treasury-indexed ARMs averaged 2.33 percent
in the seven days ended Tuesday, up from 2.14 percent previously reported by HSH for a week prior. In the week ended Feb. 12, 2015, Freddie reported the one year at 2.42 percent.

The index for the one-year ARM,
the yield on the one-year Treasury, closed at 0.47 percent Thursday, according to the Treasury Department, five BPS lower than seven days earlier.

The six-month London Interbank Offered Rate, which is also used as an ARM index, was 0.87 percent as of Wednesday, Bankrate.com reported. LIBOR was up from 0.86 percent one week previous.