Fewer borrowers are choosing adjustable rates as fixed rates continue to sink to depths never before recorded, and a new record could be in store next week. Even jumbo mortgages are participating in the rally.
A 6-basis-point decline from last week left the average 30-year fixed-rate mortgage at 3.56 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended July 12. The 30 year was 95 BPS better than the same week in 2011.
The improvement in mortgage rates was due to a weak employment report, according to Freddie’s chief economist, Frank Nothaft.
“Only 80,000 net new jobs were added to the economy last month, not enough to lower the unemployment rate from 8.2 percent,” Nothaft explained in the report. “This was the concern of the Federal Reserve’s monetary policy meeting held June 19-20. Minutes released from that meeting on July 11, revealed that a few members felt further monetary stimulus was needed to promote satisfactory growth in employment to meet the committee’s goal.”
Mortgage Daily forecasts that rates will be around 3 BPS lower in Freddie’s next survey. The yield on the 10-year Treasury note averaged 1.53 percent during the period when Freddie surveyed its 125 lenders for the latest report, while the 10-year yield closed Thursday at 1.50 percent, according to Department of the Treasury data.
Half of Bankrate.com’s panel for the week July 12 to July 18 don’t see rates moving more than 2 BPS over the next week, while 29 percent projected a decline and 21 percent predicted an increase.
Jumbo borrowers paid a smaller premium for non-conforming mortgages, based on the Mortgage Market Index report for the week ended July 6. The spread between jumbo loans and conforming mortgages slipped to 70 BPS from the previous week’s 72 BPS.
The 15-year fixed-rate mortgage had a 3-basis-point week-over-week decline, leaving the average at 2.86 percent in Freddie’s report. The discount for a 15-year loan compared to a 30-year mortgage fell to 70 BPS from the previous week’s 73 BPS.
At 2.74 percent, the five-year, Treasury-indexed, adjustable-rate mortgage was lower than the previous week’s 2.79 percent.
Freddie reported the average one-year Treasury-indexed ARM at 2.69 percent, worse than 2.68 percent last week but better than 2.95 percent during the same week last year.
There wasn’t much change during the past seven days in the index for the one-year ARM. The Treasury Department reported that the yield on the one-year Treasury note inched up to 0.20 percent today from 0.19 percent a week ago.
The scandal-engulfed six-month London Interbank Offered Rate was reported by Bankrate.com at 0.74 percent as of Wednesday, up a basis point from a week earlier. LIBOR is the index on many subprime ARMs.
ARM share continued to retreat, falling to 3.1 percent in the latest Mortgage Market Index report from the prior week’s 3.3 percent.