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ARM Share, Yield Sink

ARM Share, Yield Sink

Average 30-year fixed rate 6.46%

September 6, 2007


photo of Coco Salazar
The share of adjustable-rate mortgage applications sank — though a big drop in the yield of the 1-year Treasury-indexed ARM may change that.

At. 6.46% this week, the 30-year fixed-rate mortgage average edged up 1 basis point from a week ago and came in 1 BPS below the level a year ago, Freddie Mac said its latest Primary Mortgage Market Survey showed.

The spread between the conforming and jumbo 30-year fixed rate is around 110 BPS in certain markets, with jumbos priced at approximately 7.5%, announced today.

The 15-year fixed-rate mortgage averaged 6.15%, inching up 3 BPS from last week, Freddie said.

The benchmark for long-term mortgage rates, the 10-year Treasury note yield, closed today at 4.50%, slightly better than 4.52% a week ago.

“Over the past week, long-term mortgage rates were largely unchanged as the most recent economic news showed smaller increases than had been expected,” Freddie Chief Economist Frank Nothaft commented in an announcement.

Mortgage rates are destined to head lower through mid-October or so, according to half of the 100 mortgage “experts” surveyed by this week. A little over a third forecast rates will remain relatively unchanged over that period and the rest predict rates will rise.

For all of next quarter, however, the 30-year is expected to continue at this quarter’s average of 6.6%, according to the Mortgage Bankers Association’s latest outlook

Yields on adjustable-rate mortgages stepped down from last week, with the 5-year hybrid Treasury-indexed ARM average slipping 3 BPS to 6.32% this week and the 1-year Treasury- indexed ARM sliding 10 BPS to 5.74%, Freddie said. The Federal Reserve reported the 1-year Treasury bill itself was at 4.28% Wednesday, about 11 BPS better than a week earlier.

The share of ARM applications fell to below 13 percent from 15 percent during the last week of August, MBA reported Wednesday. ARM share had been as high as 23% during August.

Overall, mortgage shops generated a little more traffic, with originators reportedly completing 1% more applications than a week earlier mainly due to a 2 percent upturn in refinance requests as purchase money demand was almost unchanged.

Accordingly, the share of refinance applications ticked up from the previous week to above 41 percent, MBA added.


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