Long-term fixed rates slipped this week, and an even bigger drop is possible in the next report. Fifteen-year mortgages were far more attractive this week.
Secondary lender Freddie Mac reported in its Primary Mortgage Market Survey for the week ended June 26 that 30-year fixed rates averaged 4.14 percent.
The was 3 basis points better than in last week’s survey and 32 BPS lower than during the same week last year.
“Mortgage rates were down following the release of first quarter real GDP final estimate, which fell at a 2.9 percent annualized rate, a steeper than expected decline and the worst reading since the first quarter of 2009,” Freddie Mac Chief Economist Frank Nothaft explained in the report. “Also, the seasonally-adjusted S&P/Case-Shiller 20-city home price index was up only 0.2 percent in April from the previous month.”
Freddie’s regulator, the Federal Housing Finance Agency, reported that conforming 30-year fixed rates averaged 4.37 percent in May, down 16 BPS from a month earlier.
Fixed rates are poised for another weekly decline based on this week’s Treasury market activity. The 10-year Treasury yield averaged 2.60 percent during the days that Freddie surveyed lenders this week, while the 10-year yield closed at 2.53 percent Thursday, according to Treasury Department data. The movement suggests rates could be around 7 BPS better in next week’s survey.
A majority of Bankrate.com panelists for the week June 26 to July 2 predicted rates will fall at least 3 BPS over the next week. No change was projected by 47 percent, and none saw higher rates ahead.
Looking further out, Fannie Mae forecasts that 30-year fixed rates will average 4.2 percent in the third quarter, then climb 10 BPS each of the following quarters through the end of next year.
Jumbo mortgage rates were 9 BPS less than conforming rates in the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended June 13. The jumbo-conforming spread was unchanged from a week previous.
Fifteen-year fixed rates averaged 3.22 percent in Freddie’s report, improving 8 BPS during the past seven days. Fifteen-year mortgages were priced 92 BPS less than 30-year loans, a bigger discount than last week’s 87-basis-point spread.
Freddie reported that five-year, Treasury-indexed, hybrid adjustable-rate mortgages averaged 2.98 percent, 2 BPS below the week ended June 19, 2014.
Fannie predicts that hybrid ARMs will average 3.1 percent in the third quarter then rise 10 BPS every three months after that until the third-quarter 2015.
One-year Treasury-indexed ARMs averaged 2.40 percent in Freddie’s report, an improvement of a single basis point over the prior report and 26 BPS better than in the report for the week ended June 27, 2014.
Fannie’s outlook has one-year ARMs averaging 2.5 percent in the third quarter then climbing 10 BPS each quarter through the fourth-quarter 2015.
One-year ARMs adjust based on the one-year Treasury yield, which rose to 0.11 percent today from 0.09 percent seven days sooner, Treasury Department data indicate.
Many subprime mortgages adjust based on the six-month London Interbank Offered rate, which rose to 0.33 percent Wednesday from 0.32 percent one week earlier, according to Bankrate.com.
ARMs accounted for 11.1 percent of all activity in the latest Mortgage Market Index report, thinning from 11.9 percent in the previous report.
Fannie expects ARM share to rise from 11 percent in the third quarter to 12 percent in the final quarter of this year.
