Improving Rates to Reverse Course

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MORTGAGE EXPERT
3 · 03 · 11

Mortgage rates might have improved this week, but don’t expect the same next week.

Mortgage rates repeated last week’s retreat, with the 30-year fixed-rate mortgage averaging 4.87 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended March 3. The 30-year was 4.95 percent a week earlier and 4.97 percent a year earlier.

The yield on the 10-year Treasury was 3.57 percent during trading today, jumping from 3.46 percent at last Thursday’s close, based on data reported by the Department of the Treasury and WSJ.com. The inverse movement with the 30-year mortgage indicates mortgage rates might be around 19 BPS worse in next week’s report from Freddie.

Exactly half of the panelists surveyed by Bankrate.com for the week March 3 to March 9 expected no changes in mortgage rates over the next week. But rates will rise at least 3 BPS based on 39 percent, while the rest predicted a decline.

The Housing Forecast: February 2011 from Fannie Mae has the 30-year at 4.9 percent this quarter, 5.1 percent in the second quarter and 5.8 percent by the end of next year. Fannie’s 2013 prediction for the 30-year is 6 percent.

The spread between the conforming 30-year and the jumbo 30-year fell to 70 basis points in the U.S. Mortgage Market Index report for the week ended Feb. 25 from 73 BPS the previous week. The report from Mortech Inc. and MortgageDaily.com indicated that the spread was 88 BPS in the same week last year.

Freddie reported that the average 15-year fixed-rate mortgage was 4.15 percent, lower than 4.22 percent the prior Thursday. The spread between the 15-year and the 30-year fixed-rate mortgages eased to 72 basis points from last week’s 73 BPS.

At 8 BPS lower than last week, the five-year Treasury-indexed adjustable-rate mortgage averaged 3.72 percent, according to Freddie.

With a 17-basis-point weekly improvement, the one-year Treasury-indexed ARM landed at 3.23 percent, also better than 4.27 percent in the same week last year.

The prediction from Fannie is for the one-year to average 3.4 percent in the first quarter then steadily climb to 4.7 percent by 2013. But despite the worsening one-year, Fannie expects the share of loan applications to rise from 7 percent this quarter to 19 percent by the middle of 2012.

In this week’s Mortgage Market Index report, ARM share eased to 9.45 percent from last week’s 9.50 percent.

The one-year Treasury yield, which is the index used for the one-year ARM, closed Wednesday at 0.26 percent, Treasury Department data indicate. The one-year yield was 0.27 percent seven days prior.

Another ARM index, the six-month LIBOR, eased to 0.46 percent from 0.47 percent last week, Bankrate.com reported.

Refinance share in the Mortgage Market Index report nudged higher this week, to 49 percent from 48 percent.

The refinance share will come in at 58 percent this quarter then plummet to 28 percent in the second quarter, Fannie forecasted.

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Mortgage Daily Staff

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