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Near-Record Rates Could Fall Further

It’s been at least six decades since average annual long-term mortgage rates have been this low. This week’s rates hovered near their all-time lows, and next week’s rates could meander into record territory again.

Mortgage lenders participating in Freddie Mac’s Primary Mortgage Market Survey for the week ended Dec. 27 had an average 30-year fixed rate of 3.35 percent, 2 basis points better than last week. The 30 year averaged 3.95 percent a year ago.

The record-low of 3.31 percent for the 30 year was reached in the week ended Nov. 21.

Freddie Mac Chief Economist Frank Nothaft said in the latest report that 30-year mortgages averaged 3.66 percent for all of 2012, “the lowest annual average in at least 65 years.”

The Federal Housing Finance Agency, which regulates Freddie and its secondary cousin Fannie Mae, reported that conforming 30-year mortgages averaged 3.54 percent in November, 4 BPS less than in October.

A 4-basis-point decline in mortgage rates is likely in Freddie’s report next week based on a Mortgage Daily analysis of Treasury market activity this week.

The 10-year Treasury yield, which is a benchmark for mortgage rates, averaged 1.78 percent during the days that Freddie surveyed lenders this week, according to data from the Department of the Treasury. The 10-year yield closed at 1.74 percent on Thursday.

One caveat, however, is the fiscal cliff. No agreement has been reached yet between the White House and Republicans to avert spending cuts and tax increase set to go into effect on Jan. 1 if no deal is reached.

If an agreement is reached, the stock market could rally and place upward pressure on mortgage rates. No deal, however, could lead to a recession and — combined with the extreme dose of fiscal diet and exercise — drive already low rates even lower. reported that most of the panelists it surveyed this week — 86 percent — predicted that mortgage rates will not move more than 2 BPS during the next week or so. Another 14 percent predicted a decline, and none expected an increase.

Jumbo borrowers paid a 34-basis-point premium over conforming borrowers in the Mortgage Market Index report from Optimal Blue and Mortgage Daily for the week ended Dec. 21. The jumbo-conforming spread improved from 38 BPS seven days earlier.

Freddie reported that the 15-year fixed-rate mortgage averaged 2.65 percent, the same as in the week ended Dec. 20. Fifteen-year mortgages were priced 70 BPS better than 30-year loans, not as good as the 72-basis-point spread in the previous report.

At 2.70 percent, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage was 1 basis point less than last week’s average, according to Freddie.

One-year Treasury-indexed ARMs averaged 2.56 percent, 4 BPS worse than last week but 22 BPS better than the week ended Dec. 29, 2011.

The yield on the one-year Treasury note, which is used as the index on one-year ARMs, closed at 0.15 percent Thursday, the Treasury Department data indicated, unchanged from a week prior.

Another ARM index, the six-month London Interbank Offered Rate, was also unchanged from a week earlier. reported that LIBOR was 0.51 percent as of Wednesday.

Just 3.5 percent of borrowers opted for an ARM in the most-recent Mortgage Market Index report, a smaller share than the 3.6 percent in the previous report.

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