Jumbo mortgage spreads tumbled as purchase activity fell to a seven-year low and declining fixed rates stood nearly 1.50% lower than last summer.
Down 9 basis points from the prior week, the 30-year fixed-rate mortgage averaged 5.16% in Freddie Mac’s Primary Mortgage Market Survey for the week ending Feb. 12. A year earlier, the average 30-year was 5.72%.
The chief economist over at Freddie noted that the 30-year is nearly 150 BPS below the July 24, 2008, peak of 6.63%.
The 15-year fixed-rate average was 4.81%, 11 BPS lower than the prior week, Freddie reported.
Half of the 100 panelists surveyed by Bankrate.com for the week Feb. 12 to Feb. 18 predicted mortgage rates will ease at least 3 BPS during the next 35 to 45 days. No change was expected by 36 of the panelists, while 14 predicted an upsurge.
An indicator of where fixed rates are headed, the 10-year Treasury yield, was 2.804% near noon. The yield improved from 2.891% seven days earlier.
The spread between fixed rates on conforming loans and fixed rates on jumbo loans was 1.09% this week, “marking the largest weekly fall in recent history,” BanxQuote reported. Prior to July 2007, the spread had historically been only around 0.20%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.23%, 3 BPS better than the previous week, according to Freddie’s survey.
The 1-year Treasury-indexed ARM averaged 4.94% this week, up from 4.92%, Freddie said. The underlying index — the yield on the 1-year Treasury — was 0.60% yesterday, 0.07% higher than one week prior, according to U.S. Treasury Department data.
The six-month London Interbank Offered Rate, which is another ARM index, was 1.69% as of yesterday, Bankrate.com reported. LIBOR was better than 1.78% a week earlier.
ARM applications accounted for 3% of overall 1003s tracked in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Feb. 6. ARM share was 2% during the previous week.
MBA’s Market Composite Index, which reflects overall application activity, was down one-quarter on a seasonally adjusted basis from a week prior. The decline was driven by a 30% drop in refinance applications — which accounted for 67% of total applications compared to 73% last week.
The trade group said purchase applications fell 10% to the lowest level in seven years.
Government activity, which primarily reflects FHA business, was off 7%, MBA reported.