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Record Low Rates, Record High FHA Purchases

Rates on two mortgage products fell to the lowest on record, while applications climbed to a record high for loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

In Freddie Mac’s Primary Mortgage Market Survey for the week ended Oct. 8, the average 30-year fixed-rate mortgage was 4.87%, dropping 7 basis points from the Oct. 1 survey and the lowest level since 4.82% in the May 21 survey. A year ago, the 30-year stood at 5.94%.

The average 15-year fixed-rate mortgage was off a more moderate 3 BPS from the prior week to 4.33%. But the decline left the 15-year at the lowest level since Freddie began collecting weekly data in 1991.

The 10-year Treasury yield was 3.164% during trading today, moving with mortgage rates and falling from 3.232% during trading seven days earlier.

A majority of the panelists surveyed by for the week Oct. 8 to Oct. 14 expected rates to stay put during the next 35 to 45 days. But 29% predicted rates will rise at least 3 BPS, while just 14% saw a decline ahead.

During the latest week, the five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.35% — sinking 7 BPS from the prior survey. Freddie said it was also a record for the five-year, which it began tracking four years ago.

The one-year Treasury-indexed ARM, however, rose 4 BPS to 4.53%. Still, the one-year was lower than 5.15% at the same time last year.

The underlying one-year index, the yield on the one-year Treasury bill, fell to 0.34% yesterday from 0.40% the prior Wednesday.

The London Interbank Offered Rate was 0.60% yesterday, lower than 0.63% seven days earlier. LIBOR is widely used as an index on subprime ARMs.

ARM share declined to 6.1% in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Oct. 2 from 6.2% the previous week.

Boosted by falling mortgage rates, prospective borrowers took out a seasonally adjusted 16% more applications last week than they did in the prior week, MBA said. The increase was fueled by an 18% rise in refinance applications — pushing the refinance share to 66% from the prior week’s 65%.

Purchase 1003s were up 13%, while government purchase applications reached another record after rising 14%.

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