Today’s weekly mortgage survey indicated that fixed rates averaged less this past week than at any other time on record. However, the market has since changed course — and next week’s report isn’t likely to be so glowing.
At 4.01 percent for the week ended Thursday, fixed-rate 30-year mortgages were lower than during any other week since Freddie Mac began surveying mortgage lenders in 1972. The 30-year was 4.09 percent last week and 4.32 percent during the same week last year.
Freddie Mac Chief Economist Frank Nothaft explained that the record-setting performance followed the Federal Reserve Board’s announcement that it would extend the maturity of its Treasury investments and purchase mortgage-backed securities.
But the record-low rate has already evaporated based on Treasury market activity. The yield on the 10-year Treasury climbed to 1.99 percent today from 1.72 percent last Thursday, according to data published by the Department of the Treasury. The 35-basis-point disparity between the movement in Treasury yields and mortgage rates suggests mortgage rates could be more than a quarter point worse in next week’s survey.
Panelists surveyed by Bankrate.com for the week Sept. 29 to Oct. 5 didn’t offer much insight into where rates might move over the next week or so. An increase of at least 3 BPS was forecasted by 40 percent, while a third saw no changes ahead and a little more than a quarter predicted a decline.
Freddie predicts that the 30-year will average 4.1 percent in the fourth quarter then rise 20 BPS each quarter through the end of next year.
The 30-year averaged 4.63 percent in August, according to Freddie’s regulator the Federal Housing Finance Agency. The average was 4.69 percent in July.
The jumbo 30 year was priced 71 BPS higher than the conforming 30 year, according to the U.S. Mortgage Market Index report for the week ended Sept. 23, becoming a more costly option than the prior week when the jumbo-conforming spread was 63 BPS.
Also setting a new record was the 15-year mortgage, which fell a single basis point from last week to 3.28 percent. The 15 year became less attractive this week as it was priced 73 BPS lower than the 30 year versus the 80-basis-point spread in the prior survey.
Freddie reported that the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage was unchanged from last Friday’s survey at 3.02 percent.
An increase was recorded by Freddie for the one-year Treasury-indexed ARM, which averaged 2.83 percent versus 2.82 percent last week. The one-year was 2.82 percent 12 months prior. Freddie projects that the fourth-quarter average for the one-year will be 2.9 percent, while each subsequent quarter through the end of 2012 will see a 10-basis-point rise.
The index for the one-year ARM, the yield on the one-year Treasury note, was a single basis point higher than last Thursday at 0.11 percent today, the Treasury Department reported.
The London Interbank Offered Rate climbed to 0.55 percent from last week’s 0.53 percent, Bankrate.com reported.
ARMs accounted for 5.65 percent of activity in the latest Mortgage Market Index report, lower than 6.67 percent the prior week.
ARM share is expected by Freddie to inch down to 10 percent in the fourth quarter from 11 percent this quarter then spend most of next year at 12 percent.