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Record Low Rates Likely to Hold

Rates

Most mortgage rates fell to the lowest levels ever recorded, and it looks like they could hang near those lows through next week. The one exception is the one-year adjustable-rate mortgage.

Last week, Mortgage Daily forecasted that mortgage rates would decline around 10 basis points. This week, Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Feb. 2 that the average 30-year fixed-rate mortgage fell 11 BPS.

It was the same a week prior, when Mortgage Daily predicted rates would rise 10 BPS — which is exactly what they did. In fact, Mortgage Daily has accurately predicted whether rates would rise or fall in seven out of the past eight weeks.

This week’s Treasury Market data suggests rates are likely to be about the same in next week’s report. The yield on the 10-year Treasury note, a benchmark for mortgage rates, averaged 1.86 percent during the period when Freddie surveyed its 125 lenders for this week’s survey. The 10-year yield closed at 1.86 percent today.

A majority of panelists surveyed by Bankrate.com for the week Feb. 2 to Feb. 8 agreed that rates won’t move during the next week or so, while a quarter projected that rates will rise at least 3 BPS and 19 percent forecasted a decline.

Freddie said the 30 year averaged 3.87 percent this week, 3.98 percent last week and 4.81 percent a year ago.

Jumbo 30-year loans were priced 60 BPS higher than the conforming 30-year rate in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Jan. 27. The jumbo-conforming spread narrowed from 64 BPS the previous week.

A 10-basis-point decline was also reported by Freddie for the 15-year, fixed-rate mortgage, which landed at 3.14 percent this week. Fifteen-year loans were discounted by 73 BPS over the 30 year this week, not quite as good as the 74-basis-point discount last week.

With a 5-basis-point decline, the five-year, Treasury-indexed, hybrid ARM averaged 2.80 percent in Freddie’s survey.

“Most mortgage rates eased to all-time record lows this week as fourth quarter growth in the economy fell short of market projections,” Freddie Mac Chief Economist Frank Nothaft said in the report. “The gross domestic product rose 2.8 percent in the final three months of 2011, below the market consensus forecast of 3.0 percent, while consumer spending in December was flat.”

But the one-year Treasury-indexed ARM increased 2 BPS from last week to 2.80 percent, according to Freddie. The one-year, however, was better than 3.26 percent during the same week last year.

The yield on the index for the one-year ARM, the one-year Treasury note, climbed to 0.14 percent today from 0.12 percent last Thursday.

The yield on the six-month LIBOR, another index that is used to determine rate adjustments on many subprime ARMS, slipped to 0.78 percent Wednesday from 0.79 percent a week prior, according to Bankrate.com.

ARM share drifted down to 4.49 percent in the latest Mortgage Market Index report from 4.81 percent seven days earlier.

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