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Falling Rates Could Keep Slipping

Rates

The 30-year mortgage turned lower and once again fell below 4 percent. All indications are that the 30 year could be even lower in the next report.

At 3.99 percent in Freddie Mac’s survey for the week ended Thursday, fixed-rate 30-year mortgages averaged 9 basis points less that last week. The 30 year was down 87 BPS from the week ended March 31, 2011.

“Mortgage rates slid this week amid weaker housing economic indicators,” Freddie Mac Chief Economist Frank Nothaft explained in the report. “The S&P/Case Shiller 20-City Composite home price index slid in January to its lowest reading since December 2002. In addition, new home sales declined 0.5 percent in February, below the market consensus of an increase, and pending existing home sales also declined for the month.”

Mortgage rates could fall another 4 BPS or so by next week’s report based on a Treasury market analysis by Mortgage Daily. The yield on the 10-year Treasury note average 2.22 percent during the period when Freddie surveyed its 125 lenders, while the 10-year yield closed at 2.18 percent today, according to data provided by the Department of the Treasury.

A plurality of panelists surveyed by Bankrate.com for the week March 29 to April 4 agreed with that assessment, while 29 percent predicted rates would rise and another 29 percent expected rates to remain within 2 BPS of their current levels.

For all of the first quarter, Freddie estimates that the 30 year will average 4.0 percent. The secondary lender predicts that the 30 year will rise to 4.2 percent in the second quarter and keep rising through the final quarter of next year, when it is expected to average 5.0 percent.

The average 30-year mortgage on closed loans during the final week of February fell 5 BPS from the last week of January to 4.36 percent, according to Freddie’s regulator, the Federal Housing Finance Agency.

Jumbo mortgages were priced at a 58-basis-point premium over conforming loans in the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily report for the week ended March 23. The jumbo-conforming spread was worse in the previous report at 60 BPS.

Freddie reported that the average 15-year fixed-rate mortgage was at 3.23 percent this week, down from 3.30 percent in the previous report. At 76 BPS, the spread between 15-year and 30-year loans narrowed from 78 BPS last week.

A 6-basis-point week-over-week decline was reported by Freddie for the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage, which averaged 2.90 percent.

The one-year Treasury-indexed ARM fell to 2.78 percent from 2.84 percent a week earlier and 3.26 percent a year earlier, according to Freddie — which forecasts that the one year will rise from 2.8 percent in the first quarter to 2.9 percent in the second and third quarters and 3.0 percent during the following two quarters.

The index which determines one-year ARM adjustments, the yield on the one-year Treasury note, slipped 1 basis point from last Thursday to close at 0.18 percent today, according to the Treasury Department data.

No change has been reported since March 7 for the six-month London Interbank Offered Rate, or LIBOR, which Bankrate.com had at 0.74 percent.

ARM share of loan pricing inquiries was 4.3 percent in the latest Mortgage Market Index report, lower than 4.7 percent a week prior.

Freddie has ARM share of closed loans at a whopping 15 percent during all of 2012 and 2013.

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