Record-Low Rates to Rise

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10 · 15 · 10

The lowest mortgage rates since the 1950’s will probably be higher in next week’s reports. Inquiries and applications for mortgage loans have accelerated as more borrowers scramble to refinance at incredibly low interest rates. But a steep decline in refinances is projected after December.

The latest record to be shattered was the 30-year fixed-rate mortgage, which averaged 4.19 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday. It was the lowest level recorded by Freddie and the lowest level since 1948 based on a data series of FHA rates dating back to 1948.

The 30-year was 4.27 percent a week earlier and 4.92 percent a year earlier.

The 30-year will average 4.4 percent this quarter, the same as it averaged in the third quarter, Freddie predicted in its October outlook. But Freddie, which buys mortgages from lenders then sells them to investors, expects that the 30-year will edge up to 4.5 percent in the first-quarter 2010.

The cost of jumbo mortgages — loans in excess of $417,000 — became more expensive relative to their conforming counterparts, according to the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Oct. 13. The decline in the conforming rate was 0.03 percent better than the jumbo rate this week.

An analysis of the movement of the 30-year mortgage versus the 10-year Treasury yield indicates that the 30-year fixed-rate mortgage could rise as much as 0.19 percent in next week’s reports.

The majority of panelists surveyed by for the week Oct. 14 to Oct. 20 expected mortgage rates will not move during the next week or so. But 29 percent forecasted a rise and 12 percent predicted a decline.

The one-year Treasury-indexed adjustable-rate mortgage broke no records. The one-year averaged 3.43 percent in Freddie’s survey, 0.03 percent higher than last week. Freddie projects that the one-year will average 3.5 percent in the fourth quarter then rise to 3.6 percent.

Borrowers who opted for an ARM fell to 5.4 percent of applications tracked by the Mortgage Bankers Association’s survey for the week ended Oct. 8 from the prior week’s 6.1 percent. Freddie’s outlook had ARM share at 6 percent during the final three quarters of 2010 then increasing to 7 percent.

New borrower activity was 11 higher this week based on the Mortgage Market Index.

More consumers are getting a mortgage to refinance. The share of loan applicants who are refinancing expanded to 63 percent this week from 59 percent last week in the report.

Freddie projected the share of applications that are for borrowers who are refinancing will fall from 80 percent in the third-quarter to 70 percent this quarter then drop to just 55 percent in the first quarter of next year.

Mortgage Expert

Mortgage Daily Staff