Record Low for 30-year Fixed Rate

The 30-year fixed-rate mortgage averaged 5.19% for the week ending today, dropping 28 basis points from a week earlier, Freddie Mac reported in its latest weekly survey of 125 thrifts, commercial banks and mortgage lenders. A year ago, the 30-year averaged 6.14%.

Freddie said the 30-year is at the lowest level ever since it launched the Primary Mortgage Market Survey in 1971.

In its December economic outlook released yesterday, Freddie projected that the 30-year would average 5.7% during the first-quarter 2009 and climb to 6.2% by the fourth quarter.

In Freddie’s latest weekly survey, the Southwest had the lowest 30-year average: 5.09%. The 30-year was highest in the Northeast, where it averaged 5.28%.

The average 15-year fixed-rate fell 28 BPS to 4.92%.

“The decline was supported by the Federal Reserve announcement on Dec. 16, when it cut the federal funds target to a record low and stated it stood ready to expand its purchases of mortgage-related assets as conditions warrant,” Freddie Chief Economist Frank Nothaft said in the survey.

Fixed-mortgage rates move with the 10-year Treasury yield, which was 2.059% early today. A week ago, the 10-year yielded 2.644%. The 59 BPS decline suggests mortgage rates have further to fall as a result of Treasury activity during the past day.

More than two-thirds of Bankrate.com’s panelists in its mortgage rate trend survey for the week Dec. 18 to Dec. 24 projected rates will drop more than 2 BPS during the next 35 to 45 days. Another 23% expected an increase in mortgages rates, while 8% predicted no change.

The five-year Treasury-indexed hybrid adjustable-rate mortgage declined 0.22% to 5.60% — higher than the 30-year fixed rate, according to Freddie’s survey.

At 4.94%, the one-year Treasury-indexed ARM improved from 5.09 a week earlier, Freddie reported. The 1-year ARM’s underlying index, the yield on the 1-year Treasury, was 0.45% yesterday, lower than 0.49 seven days prior, data from the Department of the Treasury indicated.

Another ARM index, the six-month London Interbank Offered Rate, was 2.17% as of yesterday, according to Bankrate.com. LIBOR, which is the index on many subprime ARMs, was 2.53% the prior week.

Variable-rate loans accounted for just 1% of total loan applications reported by the Mortgage Bankers Association for the week ended Dec. 12, unchanged from the prior week.

MBA said overall loan applications in its Mortgage Applications Survey were a seasonally adjusted 3% higher than the prior week, bringing the Market Composite Index to 841.4.

Refinance applications were up 7% from last week, bringing the refinance share to 77% from 74% the prior week. Freddie’s forecast calls for refinances to account for 45% of applications each quarter of next year.

Zillow.com said data it collected indicated refinance applications during the first half of this month were up 230% from the first half of November.

Purchase applications fell 7%, however, while applications for government loan programs were unchanged, MBA’s report said.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

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