The conforming 30-year mortgage fell to a shockingly low 4.115 percent this week, while mortgage activity continued higher for the second consecutive week. The chief of a jumbo mortgage lender sees room for improvement in jumbo spreads.
New loan activity was 11 percent higher based on the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Wednesday. The index, which reflects pricing inquiries at Mortech Inc. by mortgage brokers, increased to 331 from 297 for the week ended Oct. 6.
The surge in business was fueled by refinances, which accounted for 63 percent of this week’s activity versus 59 percent last week. This week’s rate-term share was 49 percent, while the cashout share was 14 percent.
The conforming 30-year came in at 4.115 percent, sinking from 4.256 percent a week ago.
The jumbo 30-year was also down — though not as much as the conforming 30-year. The jumbo average was 5.060 percent this week and 5.180 percent last week. The disparate movement caused the jumbo-conforming spread to widen to 95 basis points from 92 BPS last week.
But despite this week’s increase, the spread has narrowed from as much as 100 BPS in July, and Total Mortgage President John Walsh credits increased market liquidity for the improvement.
“The five major conduits are offering jumbo product in some type of capacity, even though they do not have access to a securitization delivery and their sole means of execution is to portfolio,” Walsh, whose company is a jumbo lender, explained in a statement to Mortgage Daily. “Since all of these conduits cost of funds are currently extremely low, they have a fair amount of flexibility and more than enough room to pass on some price improvement to mortgage originators to help manage increased market competition.”
Conduits that can hold jumbo mortgages on their balance sheets are expecting to earn around a 30-basis-point spread over conforming, according to Walsh, who cited ” the head of capital markets for a major banking conduit.” He noted that the jumbo spread was also around this level three years ago — when a securitization outlet existed.