Mortgage rates eased, and market forces are helping to hold rates down. As mortgage applications edged higher last week, refinance share crept up this week.
In the Mortech-MortgageDaily.com Mortgage Market Index for the week ended Jan. 6, the conventional 30-year was 5.25%, unchanged from a week prior. The 30-year jumbo was also unchanged at 6.125%.
Freddie said the average 15-year fixed-rate mortgage was 4.50%, down from 4.54% last week. The conventional 15-year rate was unchanged at 4.375% in the Mortech-MortgageDaily.com report.
The yield on the 10-year Treasury note was 3.810% during early trading today, lower than 3.85% at the close of trading last Thursday, based on data from the U.S. Department of the Treasury and WSJ.com. The movement suggests there might be little change in next week’s reports.
Panelists at Bankrate.com are mixed about where rates are headed during the next 35 to 45 days, with 36% expecting that rates will move at least 3 BPS higher, 36% predicting a decline and 28% forecasting no change.
Bloomberg reported yesterday that the spread between Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds and 10- year Treasuries was 0.66% — the lowest since May 1992. The spread has fallen 9 BPS since the Treasury’s Dec. 24 announcement about an expanded bacskstop and portfolio limits for Fannie and Freddie.
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.44% in Freddie’s survey, the same as seven days earlier.
The one-year Treasury-indexed ARM averaged 4.31%, off 2 BPS from last week and 64 BPS better than a year ago, Freddie reported. Its underlying index, the yield on the one-year Treasury bill, closed yesterday at 0.40%, lower than 0.45% the previous Wednesday.
The yield on the six-month London Interbank Offered Rate was 0.43% yesterday, unchanged for the second week.
“As the economy strengthens further and the Federal Reserve decides to raise its overnight target rate, ARM rates will follow suit because they are typically tied to shorter-term interest rates,” Freddie Chief Economist Frank Nothaft explained in the survey. “However, the federal funds futures market does not anticipate any Fed action until the second half of 2010.”
New loan applications edged up 1% on a seasonally adjusted basis in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Jan. 1 after declining 23% the prior week.
In the Mortech-MortgageDaily.com index, the average U.S. mortgage amount was $203,953, higher than $202,746 the previous week. Washington, D.C.’s, $276,239 was the highest average loan amount, followed by $270,000 in Massachusetts and $256,958 in Alaska. The lowest average loan amount was in West Virginia: $126,832.
The most popular product was the conventional 30-year loan in Massachusetts — which accounted for 3.4% of the 89,590 pricing inquiries by Mortech Inc. users during the latest week.
The average U.S. jumbo loan amount was $659,853 in the Mortech-MortgageDaily.com report. The latest week was higher than $650,342 in the previous week.
MBA reported that refinance activity fell 2% during the latest week after falling 31% a week earlier, while refinance share declined to 68% from 70%.
More recently in the Mortech-MortgageDaily.com report, refinances accounted for 43% of activity, higher than 39% the prior week. This week’s share included a rate-term share of 29% and a cashout share of 14%.
Purchase applications rose 4% after falling 4% in MBA’s prior survey.