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Record Rates Might Fall Further

Rates

Another round of record-breaking interest rates helped boost mortgage business this week. One key barometer points to even lower mortgage rates. Last week’s prospective borrowers were prompted to take advantage of Federal Housing Administration programs before new requirements took effect this week.

It was a new low for the average 30-year fixed-rate, which was 4.27 percent in Freddie Mac’s survey of mortgage lenders for the week ended Thursday. The 30-year fell from 4.32 percent last week and 4.87 percent during the same week last year.

Freddie Chief Economist Frank Nothaft credited tame inflation for the new record.

As the conventional 30 year rate slipped 3 basis points from a week earlier in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Oct. 6, the jumbo 30-year fell 5 BPS to 5.180 percent — cutting the jumbo spread to 92 BPS from 95 BPS last week.

Bankrate.com’s panelists for the week Oct. 7 to Oct. 13 offered no guidance about where mortgage rates are headed; 38 percent predicted a 3-basis-point increase during the next week or so, while the rest were evenly split about whether rates would fall or stay where they are.

But the yield on the 10-year Treasury note points towards lower rates. According to data reported by the U.S. Department of the Treasury, the 10-year yield closed at 2.41 percent today — 12 BPS below last Thursday’s close. Given the smaller 5-basis-point decline in the 30-year mortgage over the same period, it still has another 5 or so BPS to fall by next week’s reports.

A new low was reached by the 15-year fixed-rate mortgage, which Freddie reported fell 3 BPS from last week to 3.72 percent.

With a 5-basis-point decline this week, the five-year Treasury-indexed adjustable-rate mortgage was 3.47 percent in Freddie’s survey. It was the lowest level on record for the hybrid ARM.

An 8-basis-point weekly decline in the one-year Treasury-indexed ARM left it averaging 3.40 percent in the Freddie Mac survey, lower than 4.53 percent a year prior. Over the past week, the one-year Treasury yield has improved 4 BPS to 0.23 percent today, based on Treasury Department data. Another ARM index, the six-month London Interbank Offered Rate — or LIBOR — was unchanged over the last week at 0.46 percent, Bankrate.com reported.

During the week ended Oct. 1, when the 30-year fell 5 BPS and the one-year was 2 BPS higher, ARM share increased to 6.1 percent from 6.0 percent seven days earlier based on the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.

Mortgage activity rose 5 percent this week based on the Mortgage Market Index, which increased to 297 from 284. The increase in the index was helped by refinance activity, which accounted for 59 percent of this week’s activity versus 58 percent last week. Rate-term refinance share was 44 percent this week, and cashout share was 15 percent.

The average loan amount in the Mortech-Mortgage Daily report climbed to $214,657 from last week’s $212,512. Washington, D.C., maintained its stronghold on the highest average loan amount: $309,419. South Dakota’s $140,187 was lowest.

Last week, when fixed rates hovered at or broke record lows, MBA’s Market Composite Index was virtually unchanged on a seasonally adjusted basis. Refinances were 3 percent lower but purchase activity was up 9 percent.

“The increase in purchase activity was led by a 17.2 percent increase in FHA applications,” MBA Chief Economist Jay Brinkman explained in the trade group’s statement. “One possible driver of last week’s big increase in FHA applications was a desire by borrowers to get applications in before new FHA requirements took effect October 4th, which included somewhat higher credit score and down payment requirements.”

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