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New Record Lows Possible for Mortgage Rates

Rates

Mortgage rates remained near record-low levels this week and are positioned to break into record territory in the next report. Rates began plummeting following the election.

A 1-basis-point increase from last week left the average 30-year fixed-rate mortgage at 3.40 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Nov. 8. A year ago, the 30 year averaged 3.99 percent.

The 30-year mortgage’s all-time low of 3.36 percent was reached in the week ended Oct. 4.

Frank Nothaft, Freddie’s chief economist, explained that while the economy added 171,000 jobs in the latest employment report, unemployment ticked up to 7.9 percent from 7.8 percent.

Market watchers can expect to see mortgage rates that are around 11 BPS better in next week’s report based on a Mortgage Daily analysis of Treasury market activity.

During the days that Freddie was surveying lenders for this week’s report, the yield on the 10-year Treasury note averaged 1.73 percent, according to rates reported by the Department of the Treasury. On Thursday, reflecting two days of improving Treasury yields following the re-election of President Barack Obama and no significant change in the congressional composition, the 10-year yield closed at 1.62 percent.

A plurality of panelists surveyed by Bankrate.com for the week Nov. 8 to Nov. 14 agreed with Mortgage Daily’s conclusion; 47 percent predicted rates will fall at least 3 BPS over the next week. No change was projected by 40 percent of the panelists, and just 13 percent forecasted a rise.

Jumbo borrowers paid a 63-basis-point premium over their conforming counterparts in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Nov. 2, less than the 67-basis-point jumbo-conforming spread in place in the previous report.

A 1-basis-point week-over-week decline left the 15-year fixed-rate mortgage averaging 2.69 percent in Freddie’s survey. The benefit to choosing a shorter term loan improved to 71 BPS from a 69-basis-point spread in the week ended Nov. 1.

Also down a basis point from last week was the average, five-year, Treasury-indexed, hybrid, adjustable-rate mortgage, which was 2.73 percent in Freddie’s report.

The one-year Treasury-indexed ARM finished this week at 2.59 percent, up from 2.58 percent in Freddie’s previous report but lower than the week ended Nov. 10, 2011, when the one year averaged 2.95 percent.

At 0.20 percent, the index for the one-year ARM — the yield on the one-year Treasury note — was 2 BPS higher on Thursday than a week earlier, according to Treasury Department data.

Bankrate.com reported that the six-month London Interbank Offered Rate, or LIBOR, fell to 0.53 percent on Wednesday from 0.54 percent seven days prior.

Just 2.3 percent of all activity in the latest Mortgage Market Index report was adjustable-rate, a slightly smaller share than the previous week’s 2.5 percent.

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