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Record Low 30-Year Ahead


As the 15-year fixed-rate mortgage fell to the lowest level on record, up-to-the-minute data indicates that the 30 year has already smashed through its record-low set late last year and could fall below 4.10 percent in next week’s report. The market movement is a boon for small originators who are poised to move quickly and capitalize on a potential refinance wave.

At 3.54 percent, the average 15-year fixed-rate mortgage was lower than it has ever been, Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Thursday. A week earlier, the 15 year averaged 4.55 percent.

Freddie said that the 30-year fell to 4.39 percent this week from 4.55 percent in the previous report. A year earlier, the 30 year averaged 4.49 percent.

Freddie’s chief economist, Frank Nothaft, explained in the report that signs of a weakening economy drove down Treasury bond yields and mortgage rates.

The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported,” Nothaft stated. “In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009. Moreover, consumer spending fell 0.2 percent in June, representing the first decline since September 2009.”

Historical data from Freddie indicates that the 30 year fell to 4.17 percent during the week ended Nov. 11, 2010 — its lowest recorded level.

A 30-day lock pricing inquiry today from Mortech Inc.’s Marksman pricing engine indicates that a $200,000 30-year fixed-rate mortgage for an owner-occupied property in Dallas is priced at 4.125 percent with 0.1 points today.

Another indicator of upcoming mortgage rates, the yield on the 10-year Treasury note, was 2.47 percent in late morning trading, tumbling from 2.98 percent last Thursday, based on data from the Department of the Treasury and The decline suggests that the 30-year will come in around 4.05 percent in next week’s report from Freddie.

The movement of interest rates is setting up the industry for a potential refinance wave. Given that many bigger players were forced to make painful job cuts when last year’s refinance rally ended, and considering the greater agility for small players to quickly open shops in local markets — smaller firms are poised to quickly capitalize on the record-low mortgage rates.

But the panelists at aren’t so optimistic. Less than a third of those surveyed for the week Aug. 4 to Aug. 10 expected rates to fall at least 3 BPS over the next week. A plurality, 44 percent, don’t expect any changes, while a quarter predicted an increase.

Freddie’s survey indicated that the spread between the 15 year and the 30 year narrowed to 85 BPS this week from 89 BPS in the previous survey.

In the U.S. Mortgage Market Index report for the week ended July 29, the spread between jumbo 30-year mortgages and conforming 30-year loans was 43 BPS. The jumbo-conforming spread was 41 BPS in the prior report from Mortech and

With a 7-basis-point weekly drop, the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage averaged 3.18 percent in Freddie’s report.

But the one-year Treasury-indexed ARM was 7 BPS higher this week, averaging 3.02 percent in Freddie’s survey. The one-year averaged 3.55 percent during the same week last year.

Despite the increase in the one-year ARM, its index — the yield on the one-year Treasury note — fell to 0.16 percent on Wednesday from 0.21 percent seven days prior.

While most other yield indicators are falling, the six-month London Interbank Offered Rate continued its ascent — reflecting nervousness among European banks. reported that LIBOR was 0.44 percent yesterday, up from 0.43 percent the previous Wednesday.

ARM share in the Mortgage Market Index report climbed to 11.01 percent of pricing inquiries from 9.89 percent in the prior report. Given the increased attractiveness in fixed-rate products this week, the share is likely to retreat in tomorrow’s report.

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