An increasing share of loan applicants are choosing adjustable-rate mortgages. And with rates possibly rising, the share is likely to continue growing.
For the third consecutive week, the average 30-year declined.
In its July 2009 Economic and Housing Market Outlook, Freddie said the 30-year was 5.0% in the second quarter, lower than the first quarter’s 5.1%. The 30-year is expected to average 5.4% in the current quarter and rise to 6.0% by the end of next year.
Also down 6 basis point from the prior week, the average 15-year fixed-rate mortgage was 4.63%, the secondary lender’s survey indicated.
The yield on the 10-year Treasury bond, which is often tracked by mortgage rates, was 3.573% at the market’s close, higher than 3.399% a week earlier and an indication mortgage rates have hit bottom.
The panelists at Bankrate.com seemed to agree, with half of those surveyed for the week July 16 to July 22 expecting rates to rise at least 3 BPS during the next 35 to 45 days. The rest were evenly split over whether rates would fall or remain where they are.
The five-year Treasury-indexed hybrid ARM averaged 4.83%, 0.01% higher than last week, according to Freddie.
But like fixed rates, the one-year Treasury-indexed ARM eased 6 BPS in Freddie’s survey. Freddie estimated the one-year was 4.8% in the second quarter, down from the prior period’s 4.9%. The one-year is projected by Freddie to come in at 4.9% this quarter and rise to 5.5% by the end of 2010.
The underlying ARM index, the yield on the one-year Treasury bill, was unchanged from a week earlier at 0.47% today, according to data reported by the U.S. Department of the Treasury.
The six-month London Interbank Offered Rate, however, eased to 0.98% this week from 1.02% as of July 8, Bankrate.com reported. LIBOR is a widely used index on subprime ARMs.
A big decline in ARM rates last week pushed ARM share up to 5.0% in the Mortgage Bankers Association’s Weekly Mortgage Application Survey for the Week ended July 10 from 4.4% the prior week. Three weeks earlier, ARM share was only 4.1%. Freddie’s projection had the second-quarter ARM share at just 2% — though that was double the first quarter’s level. ARM share isn’t projected to increase until next year, though it will jump to 6% by the end of 2010.
Also rising was refinance share, which jumped to 55% in MBA’s latest survey from the previous week’s 48%. The increased share was driven by an 18 percent increase in refinance applications. Freddie said second-quarter refinance share fell to 65% from the prior quarter’s 78%, and the share is expected to decline to 55% this quarter. By the fourth-quarter 2010, refinances are expected to account for only 46% of applications.
Fueled by stronger weekly refinance activity, overall loan applications rose 4% — pushing MBA’s Market Composite Index to 514.4. Overall 1003s might have been stronger if purchase applications hadn’t fallen 9%.