Following the government’s takeover of Fannie Mae and Freddie Mac, fixed mortgage rates fell to their lowest level in nearly five months. As new 1003 activity picked up, new applications for loans insured by the Federal Housing Administration fell for the first time in six weeks.
The 30-year fixed-rate mortgage averaged 5.93% in Freddie’s Primary Mortgage Market Survey for the week ended today. The 30-year plunged 42 basis points from last week to its lowest level since the week ended April 17 — when it stood at 5.88%. The average 30-year was 6.31% 12 months ago.
The big decline follows the Federal Housing Finance Agency move Sunday to place Fannie and Freddie into conservatorship. With the U.S. government now explicitly behind the debt of the two government-sponsored enterprises, investors are flocking back to buy debt at lower yields.
The average 15-year fixed-rate mortgage fell 43 BPS from last week to 5.54%, Freddie reported.
The 10-year Treasury yield, which fixed mortgage rates tend to move with, was 3.61 percent early today, barely changed from 3.63% a week earlier.
Bankrate.com, which surveys mortgage bankers, mortgage brokers and other industry “experts” each week for their take on where rates are headed, said 57% of the panelists for the week Sept. 11 to Sept. 17 saw mortgage rates falling further during the next 35 to 45 days. Of the remaining panelists, 29% projected rates will not move more than 2 BPS while 14% expected an increase.
Freddie said the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.87% in its latest survey, 0.10% lower that last week.
The 1-year Treasury-indexed ARM, however, increased 6 BPS to 5.21%.
The underlying index for the 1-year ARM, the 1-year Treasury yield, was 2.06% yesterday, down from 2.08% seven days earlier, according to U.S. Treasury Department data. The 6-month London Interbank Offered Rate, which is also used as an ARMÂ index, was 3.10% as of Wednesday, Bankrate.com reported. LIBORÂ was 3.12% last week.
The Mortgage Bankers Association said ARMs accounted for 6% of applications in its Weekly Mortgage Applications Survey for the week ending Sept. 5, easing from 7% the previous week.
Overall loan applications taken by loan originators jumped 10% on a seasonally adjusted basis in MBA’s survey, bringing the Market Composite Index to 496.2. Activity was adjusted to reflect the Labor day holiday.
The increase was driven by refinance applications, which were 15 percent higher than the prior week. The refinance share of mortgage activity increased to 36% from 34% a week earlier.
Purchase applications were 6% higher, but government applications reversed five weeks of increases to fall 9%. MBA said government activity mostly reflects FHA business.
