Fixed mortgage rates fell below five percent and may fall further — likely providing the swell for a big refinance wave. But the yield on the one-year adjustable-rate product increased even as its underlying index tumbled.
Down 5 basis points from the prior week, the 30-year fixed-rate mortgage averaged 4.98% in Freddie Mac’s Primary Mortgage Market Survey for the week ending March 19 — the second lowest average on record. A year earlier, the 30-year stood at 5.87%.
Freddie’s chief economist, Frank Nothaft, pointed to slower industrial production but made no mention of yesterday’s disclosure by the Federal Reserve that it planned to boost its purchases of agency mortgage-backed securities by $750 billion, purchase up to $300 billion in longer-term Treasurys over the next six months and increase its acquisition of agency debt by $100 billion.
Treasury traders cheered the fed’s strategy — pushing the yield on the 10-year Treasury to 2.515% near midday. A week earlier, the 10-year yield sat around 2.896%.
The movement in the 10-year suggests the yield on the 30-year mortgage may settle below 4.70 percent. The record low for the 30-year was reached in Freddie’s Jan. 15 survey, at 4.96%.
More than half of the 100 panelists surveyed by Bankrate.com for the week March 19 to March 25 projected a decrease of at least 0.03% in mortgage rates during the next 35 to 45 days. No change was predicted by 41%, and just 6% forecasted an increase.
The average 15-year fixed-rate mortgage was down 3 BPS from the previous week to 4.61%, Freddie said.
There was just an 0.01% decline in the five-year Treasury-indexed hybrid adjustable-rate mortgage, which averaged 4.98 percent this week, Freddie’s survey indicated.
The one-year Treasury-indexed ARM averaged 4.91% — rising 11 BPS from last week, Freddie’s survey said. But the U.S. Department of the Treasury reported that the yield on the one-year Treasury itself improved 11 BPS from a week earlier to 0.60% yesterday.
Another ARM index, the six-month London Interbank Offered Rate, was 1.88% as of yesterday, falling from 1.96% a week earlier.
ARM share was unchanged from the prior week at 2% in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending March 6.
Total applications rose 11 percent on a seasonally adjusted basis in MBA’s survey, which its says reflects data submitted by mortgage bankers, commercial banks and thrifts that account for more than half of U.S. residential applications. The Market Composite Index climbed to 723.4.
Refinance share edged up to 68% from 67% the prior week. But yesterday’s market activity suggests refinance activity, which was up 13% in MBA’s latest survey, will surge further in the next survey.
Purchase-money 1003s increased 7%, and government activity was up 10%, MBA reported.