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New Record for 1-Year ARM

Rates

Fixed mortgage rates slipped and are within striking distance of a new low. But the latest market data plus a potentially strong employment report on Friday could mean that record lows could become out-of-reach. A new all-time low, however, was established for the one-year adjustable-rate mortgage.

With a decline of 4 basis points over the past seven days, the 30-year fixed-rate mortgage averaged 3.55 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Sept. 6. The 30 year was also lower than the same week last year, when the average was 4.12 percent.

Thirty-year rates sit just above their 3.49 percent all-time low reached in the week ended July 26, 2012.

Rates are poised to come in around 8 BPS higher in Freddie’s next report based on an analysis of Treasury market activity. During the days that Freddie surveyed lenders for this week’s report, the yield on the 10-year Treasury averaged 1.60 percent, according to data reported by the Department o the Treasury. Today, the 10-year yield jumped to 1.68 percent.

If tomorrow’s employment report is strong, then the increase in mortgage rates could be more severe.

But nearly three quarters of panelists surveyed by Bankrate.com for the week Sept. 6 to Sept. 12 predicted that rates will not rise. An equal share either projected a decline of at least 3 BPS or no changes ahead. Only 28 percent expected an increase.

Jumbo borrowers were quoted a rate that 71 BPS higher than on a comparable conforming loan in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Aug. 31. The jumbo-conforming spread jumped from 63 BPS in the previous report.

No change from the week ended Aug. 30 was recorded for the 15-year fixed-rate mortgage, which averaged 2.86 percent. Borrowers who opted for a 15-year loan were treated to a rate that was 69 BPS better than a 30-year mortgage. But the spread between shorter- and longer-term mortgages narrowed from 73 BPS in Freddie’s prior survey.

Freddie reported that the five-year, Treasury-indexed, hybrid ARM was 2.75 percent, down from last week’s average of 2.78 percent.

One-year ARM borrowers saw average rates fall to 2.61 percent from 2.63 percent in Freddie’s prior report. The one year has never been this low based on the oldest historical data from Freddie since 1984. In the week ended Sept. 8, 2011, one-year ARMs averaged 2.84 percent.

One-year ARMs adjust based on the one-year Treasury yield, which climbed to 0.18 percent as of Thursday from 0.17 percent a week earlier, according to the Treasury Department data.

Another ARM index, the six-month London Interbank Offered Rate, was down again. LIBOR was 0.70 percent on Wednesday versus 0.71 percent the prior week, according to Bankrate.com.

The most recent Mortgage Market Index report had ARM share at 2.8 percent, about the same as the prior week.

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