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Rates Improve

Rates

A weak employment report helped drive down mortgage rates this past week, though a volatile market makes it unclear where rates are heading. Meanwhile, the index on a popular adjustable-rate mortgage sank.

Dropping 9 basis points from last week, the average 30-year fixed-rate mortgage was 4.51 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended July 14. The 30 year was 6 BPS better than the same week last year.

A weak employment report was credited by Freddie’s chief economist, Frank Nothaft, for the improvement.

The 30-year might be a little lower in next week’s report given that the 10-year Treasury yield — a benchmark for mortgage rates — fell 19 BPS from last Thursday to close at 2.98 percent today, according to data reported by the Department of the Treasury. However, given market volatility as a result of a possible default on U.S. debt and the fiscal crises in Italy, Ireland and Greece — it’s anybody’s guess where mortgage rates will land next week.

A majority of panelists surveyed by Bankrate.com for the week July 14 to July 20 expect no changes in mortgage rates over the next week or so. Rates will rise at least 3 BPS, according to 23 percent, and another 15 percent predicted a decline.

A weekly 10 BPS reduction was recorded by Freddie for the average 15-year fixed-rate mortgage, which came in at 3.65 percent this week.

With only a 1-basis-point reduction, the five-year, Treasury-indexed, hybrid ARM averaged 3.29 percent in this week’s report from Freddie.

Freddie said the one-year Treasury-indexed ARM was 2.95 percent, 6 BPS below last week and 79 BPS better than a year earlier.

Borrowers who have an existing one-year ARM should benefit from a 5-basis-point improvement over the past week in the one-year Treasury yield, which closed today at 0.15 percent based on Treasury Department data.

But the news wasn’t so good for borrowers with ARMs tied to the six-month London Interbank Offered Rate. LIBOR, which is the index on many outstanding subprime ARMs, rose to 0.41 percent yesterday from 0.40 percent last Wednesday, Bankrate.com reported.

ARM share was unchanged from the prior week, landing at 9.79 percent the U.S. Mortgage Market Index from Mortech Inc. and MortgageDaily.com for the week ended July 1.

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