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Record Rates Unlikely to Rise


After the Federal Reserve Board unveiled its plans for QE3, fixed mortgage rates fell to the lowest levels ever recorded and don’t appear to be headed higher anytime soon.

At 3.49 percent, the average, 30-year, fixed-rate mortgage was the lowest ever recorded by Freddie Mac in its Primary Mortgage Market Survey for the week ended Sept. 20. It was the second time the 30 year was this low; the 3.49 percent record was first established in the week ended July 26.

Last week, 30-year mortgages averaged 3.55 percent, while the average was 4.09 percent during the same week in 2011.

“Following the Federal Reserve’s announcement of a new bond purchase plan, yields on mortgage-backed securities fell bringing average fixed mortgage rates to their all-time record lows which should aid in the ongoing housing recovery,” Freddie Mac Chief Economist Frank Nothaft explained in the report.

Next week’s report from Freddie shouldn’t reflect much change in the 30-year mortgage based on an analysis of this week’s Treasury market activity. The yield on the 10-year Treasury note averaged 1.82 percent during the days that Freddie surveyed lenders for this week’s survey, while the 10-year yield closed at 1.80 percent Thursday, according to Treasury Department data.

Nearly half of the panelists surveyed by for the week Sept. 20 to Sept. 26 agreed that mortgage rates aren’t likely to move during the next week or so. Almost 40 percent predicted rates will fall at least 3 BPS, and just 15 percent forecasted a rise.

Thirty-year mortgages will average 3.6 percent from the third quarter through the middle of next year, according to Fannie Mae’s monthly forecast.

A less optimistic outlook for long-term mortgage rates was released by the Mortgage Bankers Association, which predicted that the 30 year will be 3.7 percent this quarter then climb each quarter through the fourth-quarter 2013 when it is projected to average 4.4 percent.

The premium for a jumbo mortgage over a conforming loan slipped to 65 BPS in the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily for the week ended Sept. 14 from 66 BPS a week earlier.

A new record was set in Freddie’s report for 15-year mortgages: 2.77 percent. The 15 year was 2.85 percent in the week ended Sept. 13, 2012. Fifteen-year borrowers’ rates were 72 basis points less than rates on 30-year loans. The spread widened from 70 BPS in the prior survey.

Freddie reported the average five-year, Treasury-indexed, hybrid, adjustable-rate mortgage at 2.76 percent, up 4 BPS from last week.

No change was reported by Freddie for the average one-year Treasury-indexed ARM, which averaged 2.61 percent. But the one year was lower than 2.82 percent in the week ended Sept. 22, 2011.

Fannie has the one-year ARM averaging 2.7 percent in the second half of this year then slipping to 2.6 percent in the first-quarter 2013.

The one-year ARM index — the yield on the one-year Treasury note — inched up to 0.18 percent as of Thursday from 0.17 percent a week earlier, according to the Department of the Treasury.

A 3-basis-point drop from a week earlier hit the six-month London Interbank Offered Rate, which reported at 0.66 percent as of Wednesday.

ARM share of loan inquiries was barely changed at 2.76 percent versus 2.79 percent in the previous Mortgage Market Index report.

ARM share of loan applications is projected by Fannie to be 5 percent in the third quarter and 6 percent in each of the following three quarters.

MBA has ARM share of loan production at 6 percent from the third quarter through the first three months of next year. The final three quarters of 2013 are forecasted to have an ARM share of 7 percent.

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