After five consecutive weeks of rising rates, fixed mortgage rates took a breather and could fall further. Still, the share of borrowers opting for an adjustable-rate mortgage jumped.
The average 30-year fixed-rate mortgage eased 2 basis points from last week to 4.81 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday. The 30-year had been up each week since Nov. 11, when it averaged 4.17 percent.
During the same week last year, the 30-year was 5.05 percent.
“A few signs that the economy isn’t rocketing forward served to stop the six-week rise in mortgage rates,” HSH said in its weekly market trends report. “While the economy is moving forward at a measured clip, there are few signals that it is powering ahead so forcefully that interest rates should rise much further than they already have, and they may have even overshot the mark, which is typical.”
The spread between the conforming 30-year and the jumbo 30-year increased to 78 BPS in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Wednesday from 73 BPS a week earlier.
Mortgage rates are likely to be lower in next week’s rate reports based on the 10-year Treasury yield, which closed today at 3.41 percent, down from 3.47 percent the prior Thursday, according to data reported by the Department of the Treasury.
In its Dec. 17 Mortgage Finance Forecast, the Mortgage Bankers Association predicted that the 30-year will end this year at 4.5 percent then climb to 5.5 percent by the end of next year. In Fannie Mae’s forecast released Monday, the secondary lender projected that the 30-year will increase to 4.6 percent in the first quarter of next year.
Half of the panelists surveyed by Bankrate.com for the week Dec. 23 to Dec. 29 foresaw no increase in mortgage rates over the next week or so. But 30 percent predicted an increase of at least 3 BPS, while 20 percent forecasted a decline.
Freddie reported that the average 15-year fixed-rate mortgage declined to 4.15 percent from last week’s 4.17 percent.
Also lower was the five-year Treasury-indexed hybrid ARM, which averaged 3.75 percent in Freddie’s survey this week compared to 3.77 percent last week.
The one-year Treasury-indexed ARM, however, was up 5 BPS from last week to 3.40 percent in Freddie’s report. A year earlier, the one-year averaged 4.38 percent. Fannie predicted that the one-year will fall to 3.3 percent this quarter then rise to 3.6 percent by the end of 2011.
The underlying one-year Treasury yield moved 1 basis point lower this past week to close at 0.30 percent today, according to the Treasury Department. Another ARM index, the yield on the six-month LIBOR, closed Wednesday at 0.46 percent, the same as the week before.
ARM share of new activity rose to 6.1 percent in MBA’s Weekly Mortgage Applications Survey for the week ended Dec. 17 from 5.5 percent the prior week. MBA predicts ARM share will be 7 percent for most of next year. Fannie expects ARM share to increase from 5 percent this quarter to 14 percent by the fourth-quarter 2011.
New mortgage activity was lower this week, with the Mortgage Market Index falling to 205 from last week’s 221. But business was better than at the same time last year, when the index stood at 191.
The weekly decline in new business was driven by refinances, with the total refinance share falling to 51 percent from 52 percent in the prior Mortgage Market Index report. This week’s rate-term share was 35 percent, and the cashout share was 16 percent.
MBA has refinance share at 74 percent during the current quarter then tumbling to just a quarter by the end of 2011, while Fannie has it falling from 75 percent to just over a third during the same period.
The average U.S. loan amount moved up to $205,024 in the Mortech-MortgageDaily.com report from $204,437 in the previous report. Washington, D.C.’s, $272,291 average loan amount was higher than all 50 states, while South Dakota’s $134,081 was lowest.