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Great Week for Mortgage Market

Rates

Mortgage rates tumbled this week and are likely headed even lower, while mortgage applications jumped. In addition, it’s been nearly six years since the one-year adjustable-rate mortgage has been this low.

Down 9 basis points from last week, the average 30-year fixed-rate mortgages was 4.84% in Freddie Mac’s Primary Mortgage Market Survey for the week ended May 20. The 30-year was still higher than 4.82% a year ago but stood at its lowest level since Dec. 10, 2009.

The conventional 30-year mortgage averaged 4.875% in the Mortech-MortgageDaily.com Mortgage Market Index for the week ended May 19, lower than the prior week’s 4.980%. The jumbo 30-year also fell — to 5.670% from 5.760%.

Freddie’s Chief Economist Frank Nothaft noted in Freddie’s report that mortgage rates are at the lowest levels of 2010.

If the 10-year Treasury yield is any indication, mortgage rates are likely to decline further by next week’s reports. The yield was 3.209% during trading today, sinking from 3.55% at the close of trading last Thursday, according to data reported by the U.S. Department of the Treasury and WSJ.com.

Mortgage rates can be expected to remain within 2 BPS of their current levels for the next week based on more than half of Bankrate.com’s panelists for the week May 19 to May 26. The rest were evenly split — 24% each — on whether rates would rise or fall.

Six BPS better than last week, the average 15-year fixed-rate was 4.24% in Freddie’s survey.

Lower by 4 BPS, Freddie said the five-year Treasury-indexed hybrid ARM averaged 3.91%.

The smallest decline was with the one-year Treasury-indexed ARM, which eased to 4.00% in Freddie’s survey from 4.02% seven days earlier. But the one-year, which averaged 4.82% during the same week last year, hasn’t seen a lower average since Oct. 28, 2004, when it stood at 3.96%.

The index on the one-year ARM, the yield on the one-year Treasury bill, closed yesterday at 0.35%, lower than 0.40% the prior Wednesday, according to the Treasury. Another ARM index, the six-month London Interbank Offered Rate, rose to 0.66% yesterday from 0.62% a week earlier. LIBOR is a widely used index on subprime ARMs.

Last week, when the one-year ARM improved 5 BPS and the 30-year fixed-rate was 7 BPS better, ARM share was 6.3% — unchanged for the second consecutive week, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended May 14.

MBA reported that mortgage applications declined 2% last week on a seasonally adjusted basis from seven days earlier, with a 27% decline in purchase applications. The unadjusted Purchase Index was the lowest it has been since May 1997.

This week, the Mortgage Market Index increased to 252 from 239. The index has increased three out of the last four weeks.

Loan amounts averaged $215,751 in the Mortgage Market Index report, higher than $214,339 the previous week. Washington, D.C.’s, $294,557 average was the highest, and Nebraska’s $154,515 was the lowest.

The refinance share jumped to 44% in this week’s Mortech-MortgageDaily.com report from 39% last week. The latest figure reflected a 32% rate-term share and a 12% cashout share.

Last week, based on MBA’s data, refinance applications rose 15 percent and the refinance share jumped to 68% from the previous week’s 58%.

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