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| A slowdown in the job market prompted improved rate forecasts and increased mortgage originator activity.
Falling to the lowest point since April 2004, the average 30-year fixed-rate mortgage decreased six basis points within the past week to 5.56%, according to Freddie Mac’s latest survey of 125 mortgage-lending thrifts, commercial banks and companies. “Taking into consideration the fact that mortgage rates have fallen from the earlier peak at the end of March, we have lowered our forecast for long-term rates,” Freddie chief economist Frank Nothaft said in a written statement. “We now expect that the 30-year fixed-rate mortgage rates will likely end up somewhere between 5.9 percent and 6.2 percent by the end of this year.” In its forecast a month ago, Freddie had the low end of the 30-year at 6.0% toward the end of 2005. Early last month, the Treasury Department said it was considering reinstituting the 30-year bond which it stopped selling in October 2001 because of burgeoning U.S. budget surpluses and higher cost of issuing long maturity debt. Its decision will be announced in August. A comeback in the 30-year Treasury bond won’t steepen the yield curve though, according to Colin Robertson, director of fixed income at Northern Trust. In an announcement Wednesday, he said he believes that “a continued flat yield curve should hold 30-year mortgage rates steady or perhaps allow them to drift slightly lower.” None of Bankrate.com’s surveyed panel of 100 mortgage “experts” believed rates would head upward from here until mid or late July, rather it was split evenly in half on whether rates would fall or remain unchanged. The average for the 15-year was 5.14%, also down six BPS from last week, Freddie said. Last year at this time, the spread between the 30-year and 15-year average reportedly was 21 BPS wider at 0.63%. The 10-year Treasury note was trading at a price of 101.25 and 3.96% yield Thursday afternoon, compared to figures of 101.91 and 3.89% yield a week earlier. Commenting on the behavior of rates, Nothaft said, “The May employment report came in at less than half of what was expected last month, which pushed bond yields — and mortgage rates — down further. “Consequently, markets are now speculating whether the Fed will continue raising rates at the same pace that it has been, or will it begin to moderate the frequency of its actions.” The 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly averaged 5.01% — like fixed rates, falling six BPS from last week. The 1-year Treasury Bill, which is reportedly used to price roughly half of all ARMs, was 3.28% as of Wednesday, according to the latest Federal Reserve Statistical Release, or four BPS below a week ago. Freddie reported the 1-year Treasury-indexed ARM average slid five BPS to 4.21% this week. The ARM share of total applications edged down below 32% from one-third, according to the Mortgage Bankers Association’s latest application survey, which runs one week behind Freddie’s. Application activity picked up pace, increasing 7% from the previous week. While there was a 4% upturn in purchase money loan requests, the majority of applications came from borrowers looking to refinance — the Refinan |
