Fixed mortgage rates were little changed from their record-low levels, though the long-term mortgage did set a new record. Interest rates are poised to maintain their current lows, but a looming European sovereign debt crisis remains a lingering threat to global financial markets.
It was another new low for the 30-year mortgage.
In its Primary Mortgage Market Survey for the week ended Thursday, Freddie Mac reported that fixed-rate 30-year loans averaged a record 3.78 percent. The 30 year slipped 1 basis point from last week and was 82 BPS better than the same week in 2011.
Next week’s report from Freddie isn’t likely to be much different based on Treasury market activity. The 10-year Treasury note yield, a benchmark for fixed-rate mortgages, averaged 1.76 percent during the period that Freddie surveyed its 125 lenders for this week’s report, according to Department of the Treasury data. The 10-year yield closed at 1.77 percent today.
However, the threat of a Greek exit from the Euro Zone lingers, and any new developments could roil world financial markets and push the 10-year Treasury yield below its record-low 1.72 percent established on May 17. Also potentially increasing volatility is further deterioration in Spain’s debt crisis.
A majority of panelists surveyed by Bankrate.com for the week May 24 to May 30 agreed that rates will move little over the next week or so. An increase of at least 3 BPS was predicted by 36 percent of the panelists, while just 9 percent saw a decline ahead.
Looking further out, Freddie predicts that the 30-year mortgage will average 3.9 percent this quarter, 4.0 percent in the third quarter and 4.2 percent in the final three months of 2012.
The Mortgage Bankers Association is a little less optimistic than Freddie, with its forecast calling for a 4.0 percent rate in the second quarter, a 4.1 percent rate in the third quarter and a 4.3 percent 30-year rate in the final quarter of this year.
Jumbo mortgages were priced at a 63-basis-point premium over conforming loans in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended May 18. The jumbo-conforming spread deteriorated from 57 BPS in the prior report and was worse for the second consecutive week.
While there was no decline in the 15-year fixed-rate mortgage, Freddie reported that the shorter-term loan remained at a record-low 3.04 percent. But the 15 year did lose a little of its luster this week, with the discount over 30-year loans inching down to 74 BPS from last week’s spread of 75 BPS.
Freddie said there was also no change from a week earlier for the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage, which rolled in at 2.83 percent.
A 3-basis-point week-over-week decline was recorded for the one-year Treasury-indexed ARM, which Freddie reported at 2.75 percent. The one-year ARM was 3.11 percent during this week last year.
Freddie forecasts the one year to average 2.8 percent in the second quarter then rise 10 BPS in both the third and fourth quarters.
The yield on the one-year Treasury note, which is utilized to determine rate adjustments on the one-year ARM, inched up to 0.21 percent today from 0.20 percent a week ago, the Treasury Department reported.
A 1-basis-point uptick from last week left the six-month London Interbank Offered Rate at 0.74 percent as of Wednesday, Bankrate.com reported.
ARM share of loan pricing inquiries slipped to 4.390 percent in the Mortgage Market Index report from 4.562 percent seven days prior.
MBA has ARM share of closed loans at 5 percent for the second quarter and 6 percent for the second-half 2012.
Freddie predicts that ARM share of originations will be 15 percent from the second quarter through the end of 2013.