Decline Has Rates Near Record Lows

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3 · 12 · 09

Fixed mortgage rates fell and stand near the lowest levels on record. New loan applicants continue to show little interest in loans with variable rates.

The average 30-year fixed-rate mortgage tumbled 12 basis points from last week to 5.03% in Freddie Mac’s survey of 125 thrifts, commercial banks and mortgage lenders for the week ended March 12. The 30-year was 110 BPS better than a year earlier.

The average 15-year fixed-rate eased just 8 BPS from the previous week to 4.64% but still stands 39 BPS below the 30-year, the survey indicated.

Weak employment data fueled the decline, according to Freddie’s Chief Economist Frank Nothaft, who noted that mortgage rates are still near their record lows.

The yield on the 10-year Treasury traded at 2.896% today, climbing from 2.852% seven days earlier and suggesting mortgage rates may be higher in next week’s survey.

But an overwhelming majority of panelists surveyed by for the week March 12 to March 18 saw no changes ahead in mortgage rates, with 69% predicting rates with stay within 2 BPS of today’s levels during the next 35 to 45 days. Nearly one-quarter forecasted an increase, and 8% expected interest rates to ease.

Down 0.09%, the five-year, Treasury-indexed, hybrid adjustable-rate mortgage averaged 4.99% this week, Freddie reported.

Freddie said the average one-year Treasury-indexed ARM was 4.80%, easing 6 BPS from seven days ago. The index on the one-year ARM — the yield on one-year Treasury securities — was 0.71% yesterday, unchanged from a week earlier.

The six-month London Interbank Offered Rate — or LIBOR — was 1.96% yesterday, soaring from 1.81% last week, reported. The increase will impact many subprime ARM borrowers.

ARM share, reported on a one-week lag, was unchanged at 2% in the Mortgage Bankers Association’s survey of mortgage bankers, commercial banks and thrifts for the week ended March 6. ARM share is likely to deteriorate with the spread between the 30-year fixed-rate and the one-year ARM narrowing to 23 BPS from 29 BPS last week.

MBA said total applications increased 11% on a seasonally adjusted basis from the previous week, pushing its Market Composite Index to 723.4.

Refinance activity rose 13% from the previous week, MBA’s data indicated. The refinance share edged up to 68% from 67% seven days earlier. Refinances will likely consume more of the mortgage industry’s origination resources as the recently unveiled Home Affordable Refinance program kicks in.

Freddie’s Nothaft said borrowers currently have a strong incentive to refinance given today’s low rates.

Purchase applications were up 5% in MBA’s survey, and FHA business was 10% better.

Mortgage Expert

Mortgage Daily Staff