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Erratic Behavior on ARM Indices

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Erratic Behavior on ARM IndicesAverage 30-year 6.10%

October 2, 2008


As the yield on the 1-year Treasury tumbled, the 6-month LIBOR yield soared. New 1003 activity deteriorated.

Freddie Mac reported the average 30-year fixed-rate mortgage at 6.10% in its survey of thrifts, commercial banks and mortgage lending companies for the week ending Oct. 2. The average stepped up one basis point from the prior week but was 27 BPS lower than the prior year.

The average 15-year fixed-rate was also up 0.01% from last week to 5.78%.

Fixed rates often track the 10-year Treasury yield, which was 3.66% near midday. But seven days prior, the 10-year yielded 3.85%.

Of the 100 panelists surveyed by for the week Oct. 2 to Oct. 8, more than two-thirds forecasted a rate decrease of at least 3 BPS during the next 35 to 45 days. One-in-five saw no movement ahead, while 13% predicted an increase.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 6.00% this week, nudging 2 BPS lower than seven days earlier, according to Freddie.

The one-year Treasury-indexed ARM average was 5.12%, moving 4 BPS lower than the prior week, Freddie said. The index on the 1-year ARM, the yield on the 1-year Treasury, was 1.72% yesterday, tumbling from 1.90% the prior Wednesday.

The 6-month London Interbank Offered Rate was 3.98% as of Oct. 1, reported. A week earlier, LIBOR stood at 3.47%.

The ARM share of loan applications tracked by the Mortgage Bankers Association for the week ending Sept. 26 fell to 3% from 4% the prior week.

MBA said overall applications fell 23% on a seasonally adjusted basis from the prior week, leaving the latest Market Composite Index at 455.4. The decline reflected the previous week’s 31 BPS surge in the 30-year and was driven by a 35% drop in refinance applications, which accounted for 44% of overall applications, down from 52% a week prior.

Purchase applications were down 11%, while government activity fell 14%, MBA’s survey indicated.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of


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