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Activity Lower as ARMs, Jumbos Improve


The spread between fixed- and adjustable-rate mortgages widened, and ARM share is expected to double. As the jumbo spread narrowed, fixed rates edged up but might be headed lower. Mortgage activity fell for the second consecutive week.

Increasing 0.01% from a week earlier, the average 30-year fixed-rate mortgage was 4.96% in Freddie Mac’s Primary Mortgage Market Survey for the week ended today. The 30-year was 4.98% a year earlier.

The conventional 30-year fixed-rate mortgage was 4.875% in the Mortgage Market Index for the week ended March 17, unchanged from the previous week. The report, based on more than 100,000 pricing inquiries by customers of Mortech Inc., indicated the 30-year jumbo rate fell to 5.625% from the prior week’s 5.750% — pushing the jumbo spread down to 75 BPS from 88 BPS a week earlier.

Fannie Mae projected this week that the 30-year would average 5.02% this quarter then rise to 5.13% by the second quarter and to 5.43% by the end of the year.

Also 0.01 percent higher over the past week was the average 15-year fixed-rate mortgage, which Freddie reported at 4.33%. The 15-year was unchanged at 4.25% in the report.

The 10-year Treasury yielded 3.668% during trading today, according to The 10-year fell from at 3.73% last Thursday, based on data from the U.S. Department of the Treasury. The movement indicates mortgage rates might ease in next week’s reports.

The Federal Open Market Committee announced Tuesday that it would “maintain the target range for the federal funds rate at zero to one-quarter percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

Mortgage rates will not move more than 2 BPS during the next week or so according to 59 of the 100 panelists surveyed by for the week March 18 to March 24. But one-third forecasted an increase, while 8% expected a decline.

The five-year Treasury-indexed hybrid ARM averaged 4 basis points more than last week at 4.09%, Freddie said.

But the one-year Treasury-indexed ARM averaged 10 BPS less than last week at 4.12%, according to Freddie’s survey. The contrarian movement pushed the spread between the 30-year and the one-year to 84 BPS from 73 BPS in the previous report. The one-year was 4.91% last year. Fannie projected that the one-year would average 4.27% during the first quarter then steadily rise to 4.59% by the end of the year.

The index for the one-year ARM — the yield on the one-year Treasury bill — closed yesterday at 0.40%, higher than 0.39% seven days earlier, the Treasury reported. The six-month London Interbank Offered Rate rose to 0.40% from last week’s 0.39%, reported.

The ARM share fell to 4.6% in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended March 12, lower than 5.1% in the previous report. Fannie forecasted that ARM share of applications will be 5% in the first quarter and end the year at 10%.

The Mortgage Market Index fell to 32 inquiries per user from the prior week’s 34 inquiries-per-user. It was the second week the index declined. The average U.S. loan amount was $206,364, lower than $208,132 seven days earlier. Alaska’s $285,354 was the highest average, while West Virginia’s $144,502 was the lowest.

MBA’s older data reflected that applications fell 2% last week on a seasonally adjusted basis, with refinance and purchase activity falling 2% each.

Mortgage Market Index by Week

The share of activity in the Mortgage Market Index that was for refinance transactions eased to 42% from 43% a week earlier. The cashout share was 13%, and the rate-term share was 29%.

Fannie projected that the refinance share of originations will be nearly two-thirds this quarter then fall to 35% by the third quarter.

MBA’s report indicated that last week’s refinance share was mostly unchanged at 67%.

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