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Jumbo Spreads Improve as Greece Drives Rates

Rates

As Greece and its European partners go back and forth on a bailout package, U.S. mortgage rates remain volatile. Jumbo mortgage rates, meanwhile, came out ahead this week.

At 4.00 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Thursday, the average 30-year fixed-rate mortgage was the second lowest it’s ever been. The record was set in the Oct. 6 survey: 3.94 percent.

“Market concerns over the European debt market drew investors to U.S. Treasury securities, lowering bond yields and mortgage rates,” Freddie’s chief economist, Frank Nothaft, explained in the report.

The 30 year averaged 4.10 percent a week earlier and 4.24 percent a year earlier.

Greece’s retreat from its stance that it would hold a referendum on the European bailout package had the stock market rallying today and bond prices falling. The yield on the 10-year Treasury note closed at 2.09 percent Thursday, up 6 BPS from Wednesday but still well below 2.42 percent a week earlier, according to data released by the Department of the Treasury.

Rates will decline at least 3 BPS over the next week or so according to 62 percent of panelists surveyed by Bankrate.com for the week Nov. 3 to Nov. 9. Less than a quarter predicted an increase, and 15 percent forecasted a rise.

Loan prospects paid a premium of 60 BPS on a jumbo mortgage in the U.S. Mortgage Market Index report from Mortech Inc. and MortgageDaily.com for the week ended Oct. 28. The jumbo-confirming spread was worse at 64 BPS seven days prior.

A 7-basis-point weekly decline was recorded for the average 15-year fixed-rate mortgage in Freddie’s survey, leaving it at 3.31 percent this week. The rate on the 15-year mortgage was 69 BPS lower than the 30 year. Last week, 15-year borrowers paid 72 BPS less than borrowers on 30-year loans.

Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages fell from 3.08 percent last week to less than 3 percent this week to average 2.96 percent.

A 2-basis-point retreat for the one-year Treasury-indexed ARM had it averaging 2.88 percent in Freddie’s report. The one year was 3.26 percent during the same week last year.

The yield on the one-year Treasury note, which serves as the index on the one-year ARM, closed today at 0.11 percent based on Treasury Department data, down 3 BPS over the past seven days.

Another ARM index, the six-month London Interbank Offered Rate, was 0.62 percent as of Wednesday, Bankrate.com reported. LIBOR, a popular index on subprime ARMs, was 0.61 percent a week earlier.

ARMs accounted for 5.92 percent of all loan inquiries in the Mortgage Market Index report, growing from 5.79 percent in the previous report.

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