Fixed mortgage rates fell this week — with shorter-term loans establishing a new record. But mortgage rates are likely to be as much as 10 basis points higher in next week’s reports.
Thirty-year mortgages averaged 3.37 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Oct. 18, falling 2 BPS from last week. The 30 year stands just above its all-time low of 3.36 percent reached in the week ended Oct. 4.
A year ago, 30-year mortgages averaged 4.11 percent.
Next week’s report is likely to reflect fixed rates that are around 10 BPS worse based on an analysis of this week’s Treasury market activity. The yield on the 10-year Treasury note averaged 1.76 percent during the days that Freddie surveyed lenders this week, while the 10-year yield closed at 1.86 percent today, according to the data reported by the Department of the Treasury.
Mortgage rates are also facing upward pressure due to recent reports indicating that a housing recovery is underway.
Bankrate.com reported that 43 percent of panelists surveyed for the week Oct. 18 to Oct. 24 don’t expect rates to move more than 2 BPS over the next seven days, while an equal share expected an increase. Just 14 percent projected a decline.
Fannie Mae predicted in its Housing Forecast: October 2012 that 30-year mortgages will average 3.3 percent this quarter then spend the next nine months at 3.4 percent.
Jumbo borrowers got a big price break this past week. The premium for a jumbo loan fell to 71 BPS in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Oct. 12 from the prior week’s 78 BPS.
Freddie reported that the average 15-year mortgage fell to a record-low 2.66 percent from 2.70 percent in the week ended Oct. 11. The spread between 15- and 30-year loans widened to 71 BPS from the previous week’s 69 BPS — giving prospective borrowers more incentive to opt for a shorter-term mortgage.
An increase was reported by Freddie for the hybrid, Treasury-indexed, adjustable-rate mortgage, which rose to 2.75 percent from last week’s 2.73 percent.
Also up were one-year Treasury-indexed ARMs, which Freddie said increased a single basis point to 2.60 percent. One-year ARMs averaged 2.94 percent in the week ended Oct. 20, 2011.
Fannie has the one year at 2.5 percent this quarter and the next quarter then falling to 2.4 percent in the second-quarter 2013.
The index used to determine rate and payment changes for the one-year ARM, the yield on the one-year Treasury note, was 0.18 percent Thursday, unchanged from a week earlier, according to the Treasury Department data.
At 0.59 percent as of Wednesday, the six-month London Interbank Offered Rate — or LIBOR — was 3 BPS lower than seven days prior, Bankrate.com reported.
Just 2.5 percent of all pricing inquiries in the Mortgage Market Index report were for ARM loans, a little higher share than 2.4 percent in the previous report.
ARM share of loan applications is projected by Fannie to rise from 5 percent this quarter to 6 percent over the next three quarters.