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Mortgage Rates Down, Could Go Lower

Fixed interest rates on residential loans retreated this week, and all indications are that they could fall further.

At 4.32 percent, 30-year fixed rates averaged 7 basis points less than they did last week, according to Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday.

But despite that 30-year rates have moved lower every week since the week ended Jan. 2, when they averaged 4.53 percent, the average stands well above the 3.53 percent as of a year earlier.

Rates moved lower following weak housing reports, according to Freddie Mac Chief Economist Frank Nothaft.

“Mortgage rates eased somewhat as new home sales fell 7 percent in December to a seasonally adjusted pace of 414,000 units, below the consensus,” Nothaft said in the report. “The S&P/Case-Shiller 20-city composite house price index declined 0.1 percent for the month of November, the first decrease since November 2012.”

Freddie’s regulator and conservator, the Federal Housing Finance Agency, reported that 30-year fixed rates increased to an average of 4.54 percent in December from 4.48 percent the previous month.

The Federal Open Market Committee disclosed that it decided at its December meeting to reduce its monthly purchases of agency mortgage-backed securities to $30 billion from $35 billion. Investments in Treasury securities will be cut to $35 billion a month from $40 billion a month.

Fixed rates could drop by around 3 BPS in Freddie’s next report from their current levels based on Mortgage Daily’s analysis of Treasury market activity.

According to data reported by the Department of the Treasury, the yield on the 10-year Treasury note — which is tracked by fixed mortgage rates — averaged 2.75 percent during the period that Freddie conducted this week’s survey, while it closed at 2.72 percent today.

A plurality of panelists — 42 percent — surveyed by for the week Jan. 30 to Feb. 5 predicted that mortgage rates will move at least 3 BPS lower over the next week. The remaining panelists were evenly split about whether rates would rise or stay where they are now.

Interest rates on jumbo mortgages were just under 13 BPS higher than on conforming loans in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended Jan. 24. The jumbo-conforming spread slipped from just over 13 BPS a week earlier.

Freddie reported that 15-year fixed rates averaged 3.40 percent, 4 BPS better than the week ended Jan. 23. Fifteen-year mortgages were less attractive this week, with the discount from 30-year rates falling to 92 BPS from 95 BPS in the last report.

At 3.12 percent, five-year, Treasury-indexed, adjustable-rate mortgages averaged 3 BPS lower than a week earlier.

One-year Treasury-indexed ARMs averaged 2.55 percent in the latest survey, rising from 2.54 percent in Freddie’s previous report and 2.59 percent in the week ended Jan. 31, 2013.

The one-year Treasury note, which is the index for the one-year ARM, dropped to 0.10 percent Thursday from 0.11 percent seven days earlier based on Treasury Department data.

No change from a week earlier was reported for the six-month London Interbank Offered Rate, which said was 0.33 percent Wednesday.

ARM share in the most recent Mortgage Market Index report climbed to 12.5 percent from 11.8 percent in the previous report.

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