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| Subprime borrowers need only look to the market for a modification in their interest rates — as a widely used index for subprime adjustable-rate mortgages sank. Fixed rates were also lower as refinance applications soared.
Down 5 basis points from last week, the 30-year fixed-rate mortgage averaged 5.14%, Freddie Mac reported in its Primary Mortgage Market Survey for the week ending Dec. 24. A year earlier, the 30-year average was 6.17%. Freddie said the 30-year was again at its lowest level since it launched the survey in 1971. “Real GDP growth fell 0.5 percent in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980,” Freddie Chief Economist Frank Nothaft said in the report. “The market consensus calls for an even larger decline in the last three months of the year.” The majority — 69% — of panelists surveyed by Bankrate.com for the week Dec. 18 to Dec. 24 predicted rates will continue falling. Nearly a quarter forecasted an increase of at least 3 BPS during the next 35 to 45 days, while 8% expect rates to stay put. The average 15-year fixed rate eased a more moderate 1 basis point from last week to 4.91%. A benchmark for the direction of fixed-mortgage rates, the 10-year Treasury yield, was 2.171% early today, higher than 2.059% last week and a signal that mortgage rates will head higher in the next survey. Freddie said the five-year Treasury-indexed hybrid ARM averaged 5.49% in the latest survey, 11 BPS lower than last week. The one-year Treasury-indexed ARM averaged 4.95%, 0.01% higher than seven days earlier. The index on the one-year ARM, the yield on the one-year Treasury, was 0.41% yesterday, down from 0.45% a week earlier. The six-month London Interbank Offered Rate, which is the index on many subprime ARMs, was 1.85% today, Bankrate.com reported. The prior week, LIBOR stood at 2.17%. Despite falling ARM indices, 99.2% of all applications tracked in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Dec. 19 were for fixed-rate loans. The ARM share was 1.1% the previous week. MBA said overall applications jumped 48% on a seasonally adjusted basis in its latest survey, pushing the Market Composite Index to 1245.4. Applications were 50% higher than a year earlier. Rising refinances drove the improvement, with MBA’s Refinance Index increasing 63% from the prior week. Refinances accounted for 83% of the latest week’s overall applications. Purchase applications were 11% higher, while government activity fell 4%, MBA reported. |
