Mortgage Daily

Published On: January 2, 2010

Interest rates again fell to new lows but failed to stimulate an improvement in new lending activity. Mortgage rates are likely to be higher in next week’s reports.

As goes the weekly rhetoric lately, a new record was reported Thursday by Freddie Mac for the average 30-year fixed-rated mortgage. In its latest survey of 125 mortgage bankers, the McLean, Va.-based secondary lender said the 30-year fell to 4.32 percent — the lowest level recorded since it began tracking the 30-year in 1971 — from 4.36 percent last week. The 30-year was 5.08 during the same week in 2009.

In explaining the decline, Freddie Deputy Chief Economist Amy Crews Cutts pointed to Federal Reserve Board Chairman Ben Bernanke’s Aug. 27 speech in Wyoming indicating that inflation should remain in check for some time with a growing economy and reasonably stable inflation expectations.

The Federal Housing Finance Agency, which regulates Freddie and its secondary cousin Fannie Mae, reported that the average 30-year fixed-rate was 4.84 percent in July, down 16 BPS from the previous month.

The 30-year jumbo mortgage was 5.20 percent in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Sept. 1, unchanged from seven days earlier. But the conventional 30-year was 2 BPS lower in the report — increasing the jumbo-conforming spread to 91 BPS from last week’s 88 BPS.

The 30-year mortgage is likely to shoot up in next week’s reports based on activity with the 10-year yield, which jumped to 2.627 percent during trading today from 2.50 percent at the market’s close last Thursday, according to data published by the U.S. Department of the Treasury and WSJ.com.

But a majority of Bankrate.com panelists for the week Sept. 3 to Sept. 9 see no change over the next week for mortgage rates, while the rest were equally split about whether rates would rise or retreat by at least 3 BPS.

The 15-year fixed-rate mortgage also enjoyed a new record: 3.83 percent. Freddie reported the 15-year average at 3.86 percent last Thursday. FHFA said the 15-year increased 19 BPS in July to 4.66 percent.

Falling 2 basis points from a week ago, the five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.54 percent in Freddie’s latest survey.

At 3.50 percent, the one-year Treasury-indexed ARM was also 2 BPS better than in Freddie’s prior survey. The one-year averaged 4.62 percent 52 weeks ago. The index for the one-year ARM, the yield on the one-year Treasury, closed Wednesday at 0.25 percent, a tad lower than 0.26 percent a week prior based on Treasury data.

The six-month London Interbank Offered Rate was 0.50 percent Wednesday, lower than the previous week’s 0.52 percent.

FHFA reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes fell 0.13 percent from June to 4.78 percent in July from in June. The rate is used as an ARM index.

Last week — when the one-year ARM eased 1 basis point and the 30-year fixed rate improved 6 BPS — more loan prospects who were tracked in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Aug. 27 opted for an ARM, pushing ARM share to 6.1 percent from the previous week’s 5.8 percent.

Although mortgage rates continued to improve, mortgage activity slowed. The Mortgage Market Index was 348 this week, easing from 355 in the week ended Aug. 25. In addition, the average loan amount fell to $214,263 from $214,838. The highest average of $321,119 was in Washington, D.C., and the lowest was Mississippi’s $155,351.

While the Mortgage Market Index reflects this week’s new activity at mortgage brokerages, MBA’s Market Composite Index reflects last week’s application activity at mortgage banking firms. MBA said activity rose 3 percent on a seasonally adjusted basis from a week earlier. Refinances rose 3 percent and purchases climbed 2 percent.

Despite the Mortgage Market Index‘s decline, the share of refinances was up less than a basis point to 64 percent, indicating purchase activity was lower. This week’s refinance share included a 49 percent rate-term share and a 15 percent cashout share.

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