Mortgage rates were better this week — with a hybrid product exhibiting the biggest decline. The outlook is for the same rates next week, a growing adjustable-rate share and a shrinking proportion of refinances.
As expected, the average 30-year fixed-rate mortgage was lower in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday. The 30-year fell to 4.80 percent from 4.91 percent a week earlier. A year earlier, the 30-year was 5.07 percent.
Freddie’s chief economist, Frank Nothaft, attributed the improvement to low inflation.
It looks like the 30-year won’t be changing a whole lot by next week’s reports based on 10-year Treasury yield movement. The 10-year yielded 3.39 percent in trading late today, falling from 3.51 percent seven days prior, according to data published by Department of the Treasury and WSJ.com.
A majority of panelists surveyed by Bankrate.com for the week April 21 to April 27 agreed that rates aren’t going move over the next week. But 29 percent predicted rates will increase at least 3 BPS and 18 percent forecasted a decline.
On a longer-term basis, the 30-year is expected to average 5.1 percent in the second quarter, Fannie Mae predicted in its April housing forecast. It will rise to 5.3 percent in the following quarter and eventually reach 5.8 percent by the end of next year.
The Mortgage Bankers Association also predicted 5.1 percent for the 30-year this quarter. Then the trade group has the benchmark rate climbing to 5.4 percent in the third quarter and 5.6 percent in the following two periods.
The spread between the conforming 30-year mortgage and the jumbo 30-year was 59 BPS in the U.S. Mortgage Market Index from Mortech Inc. and MortgageDaily.com for the week ended April 15 — improving from 60 BPS the previous week.
Like the 30-year, Freddie said the average-15-year fixed-rate mortgage moved 11 basis points lower this week, to 4.02 percent. The parallel movement left the spread between the 30-year and the 15-year at 78 BPS.
The biggest weekly decline — 17 BPS — occurred with the five-year Treasury-indexed hybrid adjustable-rate mortgage. Freddie reported the five-year average at 3.61 percent.
Freddie said that the one-year Treasury-indexed ARM fell 9 BPS to 3.16 percent and was 4.22 percent one year prior. The underlying one-year Treasury yield was 0.24 percent yesterday, 1 basis point higher than the prior Wednesday, according to Treasury Department data.
Fannie projects an average one-year ARM of 3.5 percent this quarter, 3.6 percent in the third quarter and 3.8 percent in the final quarter of this year.
The six-month London Interbank Offered Rate, a widely used index on subprime ARMs, was 0.43 percent as of Wednesday, Bankrate.com reported. LIBOR was 0.44 percent last week.
Based on Mortech Inc. pricing inquiries, ARM share eased to 9.55 percent this week from 9.75 percent.
Fannie has ARM share of applications rising to 6 percent this quarter from the first quarter’s 5 percent then ascending to 13 percent by the close of 2012. MBA sees ARM share increasing from 6 percent in the first quarter to the second quarter’s 7 percent — where it will sit through the first three months of next year.
Refinance share was trimmed to a little less than 41 percent this week from a little more than 41 percent in the Mortgage Market Index report.
Refinance share of production is expected by Fannie to decline to 35 percent in the second quarter from 60 percent then settle just below a third for the second half of the year. MBA, meanwhile, forecasts that refinance share will drop from nearly two-thirds in the first quarter to 61 percent this quarter and 31 percent by the third quarter. After that, MBA expects refinance share to freeze around a quarter through 2012.