Rates Mixed, Activity Down

Rates

Mortgage Daily Staff

                                                 January 3, 2011

For five months now, the 11th District adjustable-rate mortgage index has fallen, while the one-year ARM tumbled 14 basis points during the most recent week. Although mortgage rates generally moved higher in the last week of 2010, some signals indicate a possible decline during the first week of the new year. But the jumbo-conforming spread grew wider, and an indicator of new loan activity fell to the lowest level of 2010.

At 4.86 percent, the interest rate on the 30-year fixed-rate mortgage was 5 basis points higher than in the prior week based on Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday. During the same week in 2009, the 30-year was 5.14 percent.

“For the year as a whole, 30-year fixed mortgage rates averaged just below 4.7 percent, which represented the lowest annual average since 1955 when the average price of a home was $22,000,” the chief economist of Freddie, Frank Nothaft, said.

The Federal Housing Finance Agency, which regulates Nothaft’s employer, reported data from both Freddie and Fannie Mae that indicated the conventional 30-year averaged 4.38 percent in November for purchase-money loans, 12 BPS better than October.

A little more than a quarter of purchase-transactions in FHFA’s report involved no points, down from a third the month before. The average loan term edged up to 28.1 years from October’s 28.0 years.

The jumbo 30-year fixed-rate mortgage increased 7 BPS in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Wednesday, while the conforming 30-year was 2 BPS lower. As a result, the jumbo-conforming spread increased to 87 BPS from the previous week’s 78 BPS.

The yield on the 10-year Treasury closed out 2010 at 3.38 percent, lower than 3.41 percent at the time of Freddie’s previous weekly report. The activity suggests that the rate on the 30-year home loan might be lower in next week’s report from Freddie.

But a majority of panelists surveyed by Bankrate.com for the week Dec. 30, 2010, to Jan. 5, 2011, predicted that rates will rise at least 3 BPS over the next week. A little more than a quarter forecasted no changes ahead, and 18 percent expected a decline.

Freddie reported the average 15-year fixed-rate mortgage at 4.20 percent, 5 basis points higher than the prior Thursday’s report.

Just 2 BPS higher for the latest seven-day period, the five-year Treasury-indexed hybrid ARM averaged 3.77 percent in Freddie’s survey.

The only product to retreat in the report from Freddie was the one-year Treasury-indexed ARM — which tumbled to 3.26 percent from the previous week’s 3.40 percent and from 4.33 percent a year ago. The underlying yield on the one-year Treasury closed this year at 0.29 percent, a basis point higher than the prior Thursday.

The 11th District Cost of Funds Index fell to 1.571 percent in November from 1.654 percent in October, the Federal Home Loan Bank of San Francisco reported. COFI — which reflects interest expense on $35.6 billion in depository liabilities for member banks based in Arizona, California and Nevada — was 2.094 percent in November 2009. It has been down each of the past five months.

The one-year Treasury yield moved to 0.27 percent at the end of November from 0.22 percent at the end of October.

The six-month London Interbank Offered Rate finished November at 0.46 percent, 1 basis point higher than October, according to data from Bankrate.com. LIBOR closed out December also at 0.46 percent.

The most recent Mortgage Market Index fell to 140 from the prior week’s 205 and from 166 a year earlier. It was the lowest that the index has been since launching in December 2009. Refinance share, which was 39 percent during the same week last year, fell to 46 percent from the previous week’s 51 percent.

The average U.S. loan amount in the Mortech-Mortgage Daily report fell to $197,992 from the previous week’s $205,024. The highest state average was Hawaii’s $321,972, and South Dakota’s $136,331 was lowest.

FHFA said the average conforming loan amount was $214,800 during November, lower than October’s $215,000. The average loan-to-value based on the purchase price rose to 75 percent from 72 percent.

Mortgage Daily Staff

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