It was the second consecutive week that 15-year mortgages lost some of their advantage over 30-year loans and the first time that 30-year mortgages were priced under 4 percent. Both products fell to their lowest levels on record. But one-year adjustable-rate mortgages turned higher in response to the Federal Reserve’s Operation Twist.
At a record-low 3.94 percent for the week ended Oct. 6, it was the first time ever that average 30-year fixed-rate mortgage was lower than 4 percent in Freddie Mac’s Primary Mortgage Market Survey. The 30 year was 4.01 percent a week earlier and 4.27 percent a year earlier.
Freddie’s chief economist, Frank Nothaft, attributed the decline to concerns about a global recession.
The yield on the 10-year Treasury note inched up to 2.01 percent as of today’s close from 1.99 percent at the close of business last Thursday, the Department of the Treasury reported. The movement suggests that mortgage rates could be around 5 basis points worse in next week’s reports.
The 10-year yield had fallen to 1.80 percent on Monday.
A majority of panelists surveyed by Bankrate.com for the week Oct. 6 to Oct. 12 predicted that rates will increase at least 3 BPS over the next week or so. Less than a third forecast no changes in mortgage rates, while 15 percent said rates will fall.
Jumbo borrowers were paying 70 BPSÂ more than conforming borrowers in the U.S. Mortgage Market Index report from Mortech Inc. and MortgageDaily.com for the week ended Sept. 30. The jumbo-conforming spread was 71 BPS a week prior.
Also reaching the lowest level in the history of Freddie’s survey was the average 15-year fixed-rate mortgage, which fell to 3.26 percent from 3.28 percent last week. Fifteen-year mortgages were priced 68 BPS better than 30-year loans, losing some of their luster from last week when they were priced 73 BPS below 30-year mortgages.
Freddie said that the average five-year, Treasury-indexed, hybrid ARM dropped to 2.96 percent from 3.02 percent.
But the one-year Treasury-indexed ARM was higher this week, climbing to 2.95 percent from 2.83 percent. However, the one-year ARM was much better than 3.40 percent during the same week in 2010.
The rise in the one-year ARM was the result of the Fed’s strategy to replace $400 billion in short-term Treasury securities with longer-term Treasury investments, Nothaft explained.
The one-year ARM moves based on the one-year Treasury yield, which fell to 0.09 percent today from 0.11 percent a week ago, based on Treasury Department data.
Bankrate.com reported the six-month London Interbank Offered Rate at 0.57 percent as of Wednesday, continuing its ascent from last week’s 0.55 percent. LIBORÂ has been rising on concern over European banks’ exposure to a possible default on Greek debt.
As of Friday, ARM share was 5.48 percent, higher than the previous week’s 5.65 percent, according to the Mortgage Market Index report.
