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1-Year Spread Widest Since 2008

Rates

The spread between the one-year adjustable-rate mortgage and the 30-year fixed rate mortgage is at its widest point in 18 months. Loan activity, meanwhile, increased for the second consecutive week. The rise could be tied to the upcoming expiration of the homebuyer tax credit.

Rising to its highest level in 12 weeks, the average 30-year fixed-rate mortgage was 5.08% in Freddie Mac’s survey of 125 mortgage lenders for the week ended today. The 30-year was 4.99% a week earlier and 4.78% a year earlier. It was the highest level for the 30-year since the week ended Jan. 7, when it stood at 5.09%.

Freddie’s regulator, the Federal Housing Finance Agency, reported Tuesday that the conventional 30-year fixed-rate averaged 5.13% during February, an increase of 3 BPS from January.

A barometer for mortgage rates, the yield on the 10-year Treasury bond, improved to 3.863% during trading today from 3.91% at the close of trading last Thursday, based on data from the U.S. Department of the Treasury and WSJ.com. The movement leaves room for mortgage rates to ease in next week’s reports.

More than two-thirds of the panelists surveyed by Bankrate.com for the week April 1 to April 7 forecasted that rates will increased at least 3 BPS during the next week or so. One-quarter predicted no change, and 6% projected a decline.

The weekly rise in the 15-year fixed-rate mortgage was a more moderate 5 basis points to 4.39%, according to Freddie. FHFA said the 15-year rose 11 BPS from January to 4.65% in February.

But the five-year Treasury-indexed hybrid adjustable-rate mortgage fell 4 BPS to 4.10%, according to Freddie.

Also lower was the one-year Treasury-indexed ARM — falling to 4.05% from 4.20% a week earlier and 4.75% a year earlier. The spread between the 30-year and the one-year widened from 79 BPS last week to 103 BPS — the widest it’s been since it stood at 108 BPS in the week ended Oct. 16, 2008.

One-year ARM borrowers saw their index, the yield on the one-year Treasury bill, improve to 0.41% as of yesterday from 0.44% the prior Wednesday, according to Treasury data. Many subprime ARM borrowers saw their index, the six-month London Interbank Offered Rate, increase to 0.44% yesterday from last week’s 0.43%, Bankrate.com reported.

Last week 5.2% of borrowers in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended March 26 opted for an ARM, a bigger share than the prior week’s 4.8%. Increased ARM share seemed to contradict the more favorable 3 basis-point increase in the 30-year last week compared to the 8-basis-point rise in the one-year.

Mortgage activity rose 3 percent from last week, according to the Mortech-MortgageDaily.com Mortgage Market Index for the week ended March 31. The index, which reflects pricing inquiries by originator customers of Mortech, was 237 this week.

MBA’s older data reflected that applications nudged up 1% last week on a seasonally adjusted basis. The rise was related to purchase activity — which increased 7% to its highest level since October 2009. The jump in purchase activity is likely tied to the April 30 expiration of the $8,000 homebuyer tax credit, which was extended from Nov. 30, 2009, through the Worker, Homeownership, and Business Assistance Act of 2009.

Data in the Mortgage Market Index report indicated that the average U.S. loan amount eased to $206,249 from the previous week’s $206,882. Washington, D.C.’s, $320,262 average loan amount was higher than any state, while North Dakota’s $133,893 was the lowest. The average jumbo loan amount rose to $650,164 from last week’s $645,304.

Refinances accounted for 37% of activity in the Mortech-MortgageDaily.com report, lower than 40% seven days earlier. This week’s share reflected a 24% rate-term share and a 13% cashout share.

Refinance share in MBA’s report fell to 63% last week from 65%, with new refinance applications slowing 1%.

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