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Even Lower Rates Might Be Ahead


Mortgage rates slipped during the past week and might fall even further by next week’s report. However, a government report due out tomorrow could change that outlook.

It was only a 1-basis-point decline from last week, but it was still a decline for the 30-year fixed-rate mortgage, which Freddie Mac reported at 3.98 percent in its Primary Mortgage Market Survey for the week ended April 5. A year ago, the 30 year averaged 4.87 percent.

Mixed economic signals helped keep rates in check, according to Freddie Mac Chief Economist Frank Nothaft.

A Mortgage Daily analysis of Treasury market activity points to even lower mortgage rates in next week’s survey. The yield on the 10-year Treasury averaged 2.26 percent during the days when Freddie surveyed its 125 lenders this week, while the 10-year yield closed at 2.19 percent today, according to data provided by the Department of the Treasury. The movement suggests mortgage rates could be around 7 BPS better in the next report.

Helping to hold down rates this week was a disappointing auction for Spanish bonds. However, a stronger-than-expected employment report from the U.S. Department of Labor tomorrow could push rates higher, while a weak report could place added downward pressure on rates.

Rates will rise at least 3 BPS during the next week according to 72 percent of panelists surveyed by for the week April 5 to April 11. Just 14 percent predicted a downturn, while the same proportion saw no changes ahead.

Jumbo borrowers were quoted rates that were an average of 59 BPS higher than conforming borrowers based on the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended March 30. The jumbo-conforming spread was 58 BPS in the previous report.

Freddie said that the 15-year average slipped to 3.21 percent from 3.23 percent seven days earlier. The 15-year mortgage was discounted 77 BPS over the 30-year rate, making it slightly more attractive than last week when the spread was 76 BPS.

Meanwhile, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 2.86 percent in Freddie’s survey. The five-year ARM was 2.90 percent in the previous report.

The one-year Treasury-indexed ARM didn’t move from 2.78 percent last week but has fallen from the same week in 2011 when it was 3.22 percent.

The Treasury Department reported that the yield on the one-year Treasury note, which is used to determine adjustments on one-year ARMs, crept up to 0.19 percent from 0.18 percent a week ago.

A 1-basis-point week-over-week drop was reported by for the six-month London Interbank Offered Rate, or LIBOR, which was 0.73 percent as of Wednesday.

ARM share of pricing inquiries eased to 4.296 percent from 4.309 percent in the Mortgage Market Index report.

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