|Mortgage rates hit their lowest level in 40 years this past week. However, a stock market rally and the lack of traders caused related Treasury yields to spike during the past couple days.Freddie Mac, which surveys 125 thrifts, commercial banks and mortgage lending companies each week, reported that the average 30-year fixed rate mortgage was 5.85% — its lowest point since Freddie began tracking it in 1971. In its announcement, Freddie noted that when compared to figures from the Federal Housing Finance Board, the 30-year has not been this low since the early 1960s. A year ago, the average 30-year was 7.14%.
The average 15-year fell eight basis points (BPS) from last week to a record low 5.24%, Freddie said.
While fixed rates were reported at record low levels, a key Treasury yield has jumped significantly over the past couple days; the 10-year Treasury Note — which had fallen to below 3.70% in October — now stands at 4.07%. The Wall Street Journal attributed the recent days’ giant swings to the lack of investors in the market as the holiday period ends (fewer traders are having more of an effect).
The average one-year adjustable rate mortgage (ARM) rose five BPS from last week record low to 4.06%, according to Freddie’s survey. Record low fixed rates appear to be driving down ARM activity; according to the weekly mortgage activity survey by the Mortgage Bankers Association of America (MBA), ARM applications represented just 11.2% of total applications, down from 13.3% a week earlier.
MBA said overall applications rose 4.7% from last week, with the application index reaching 950.9. A year ago, the index was at 439.2, and the index had been as high as 1317.0 in October.
Refinance applications rose nearly 11 percent, with the index reaching 4548.8, MBA said. The refinance index reached its highest level ever during October at 6926.9. Refinances represented about 76% of total applications.
The MBA seasonally adjusted Purchase Index decreased to 332.4 from 359.4 the previous week.