Thanks to aggressive purchasing of agency mortgage-backed securities by the Federal Reserve, mortgage rates were lower across the board this week with three products falling to all-time lows. All signs indicate that rates aren’t likely to turn higher.
A 9-basis-point drop left the average 30-year fixed-rate mortgage at 3.40 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Sept. 27.
It was the lowest level on record for the 30 year.
In the prior survey, 30-year mortgages averaged 3.49 percent. A year earlier, the 30 year averaged 4.01 percent.
Fed MBS purchases drove mortgage rates lower, according to Frank Nothaft, Freddie’s chief economist.
On home purchase transactions, the average 30-year rate on new loans purchased or guaranteed by Freddie and secondary rival Fannie Mae was 3.74 percent as of the final week of August, 10 basis points lower than July, the Federal Housing Finance Agency reported.
There is a little room for mortgage rates to move lower based on this week’s Treasury market activity. During the period when Freddie surveyed lenders for its latest report, the 10-year Treasury note yield averaged 1.69 percent, while the yield closed at 1.66 percent Thursday, according to data from the Department of the Treasury. However, the relationship between the 10-year Treasury yield and fixed mortgage rates was recently distorted as the spread between Treasury bonds and agency MBSÂ narrowed following word of the Fed’s plans to increase purchases.
Half of Bankrate.com’s panelists for the week Sept. 27 to Oct. 3 predicted that rates will move at least 3 BPS lower during the next week, while 43 percent predicted no changes ahead and just 7 percent forecasted an increase.
The cost of a jumbo mortgage increased to 69 BPS more than conforming mortgages in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Sept. 21. The jumbo-conforming spread was 65 BPS in the previous report.
Freddie reported that the 15-year fixed-rate mortgage fell to a record-low 2.73 percent. The average was 2.77 percent last week. The spread between 15- and 30-year mortgages collapsed to 67 BPS from 72 BPS a week earlier, making shorter term loans less attractive.
The only product tracked by Freddie that didn’t establish a new record was the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage, which fell to 2.71 percent from 2.76 percent seven days prior.
A record-showing for the one-year Treasury-indexed ARM left it at 2.60 percent, down from 2.61 percent a week earlier and 2.83 percent a year earlier.
Treasury Department data indicate that the yield on the one-year Treasury note fell to 0.16 percent Thursday from 0.18 percent a week earlier.
Another ARM index, the six-month London Interbank Offered Rate, slipped to 0.65 percent Wednesday from 0.66 percent a week prior, according to Bankrate.com.
ARMs accounted for 2.8 percent of activity in the latest Mortgage Market Index report, not much different than in the prior report.
