A new record low was established for the one-year adjustable-rate mortgage this week. While the news wasn’t so good for fixed mortgage rates, fixed rates are positioned to fall in next week’s report. The discount for a 15-year loan has increased over the past seven days.
For the second consecutive week, fixed mortgage rates moved higher. In Freddie Mac’s Primary Mortgage Market Survey for the week ended Aug. 9, the 30-year mortgage averaged 3.59 percent. The 30 year climbed from 3.55 percent last week and 4.32 percent during the same week last year.
The 30 year’s rise was the result of a strong employment report, according to Frank Nothaft, Freddie’s chief economist.
The 30-year mortgage will likely be around 5 BPS better in next week’s report from Freddie based on an analysis of Treasury market activity. The benchmark 10-year Treasury yield averaged 1.64 percent during the period when lenders were surveyed for Freddie’s report, while the 10-year yield closed at 1.69 percent Thursday, according to the Department of the Treasury.
But the panelists surveyed by Bankrate.com for the week Aug. 9 to Aug. 15 aren’t so optimistic; 42 percent predicted an increase of at least 3 BPS in mortgage rates during the next week, another 42 percent forecasted no changes ahead and just 16 percent projected a decline.
Freddie predicts that the 30-year will average 3.5 percent this quarter, 3.6 percent in the fourth quarter and 3.8 percent in the first three months of 2013.
Jumbo mortgages were priced at a 78-basis-point premium to conforming mortgages in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Aug. 3, deteriorating from 77 BPS in the prior report.
The 15-year fixed-rate mortgage had a more moderate increase this week than the 30 year, averaging 2.84 percent versus 2.83 percent in Freddie’s prior survey. Compared to the 30-year mortgage, the 15 year was more competitive this week — with the rate discount climbing to 75 BPS from 72 BPS a week ago.
A 2-basis-point increase from a week earlier left the average five-year, Treasury-indexed, hybrid, adjustable-rate mortgage at 2.77 percent, according to Freddie.
The one-year Treasury-indexed ARM broke from the pack, falling 5 BPS from Freddie’s prior survey to 2.65 percent. A year ago, the one-year ARM averaged 2.89 percent.
Based on data from Freddie going back to 1984, this week’s one-year ARM was the lowest ever — breaking the record established in the week ended July 5 when the average one year fell to 2.68 percent.
Freddie projects that the one-year ARM will average 2.8 percent each quarter until the first-quarter 2013.
The index for the one-year ARM, the yield on the one-year Treasury note, climbed to 0.20 percent today from 0.17 percent last Thursday based on Treasury Department data.
The six-month London Interbank Offered Rate slipped to 0.72 percent Wednesday from 0.73 percent a week earlier, according to Bankrate.com. Like the one-year Treasury yield, LIBOR is used an ARM index.
ARM share of loan pricing inquiries slipped to 2.8 percent in the latest Mortgage Market Index report from 2.9 percent a week prior.
ARM share of closed loan production will be 14 percent in the second half of this year and 15 percent during each quarter next year, according to Freddie’s forecast.