Mortgage Rates Drop, Further Decline Could Follow

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3 · 19 · 15

Interest rates on home loans took a tumble this past week, and signs point to an even further decline in the upcoming report.

An eight-basis-point improvement from the previous week was recorded for 30-year fixed rates, which averaged 3.78 percent in the week ended March 19.

Freddie Mac, which reported interest rates in its weekly Primary Mortgage Market Survey, said that the 30 year averaged 4.32 percent in the same week last year.

Freddie Mac Deputy Chief Economist Len Kiefer noted in the report that the decline in rates followed mixed housing data.

Housing starts dropped 17 percent to a seasonally adjusted pace of 897,000 units, below market expectations. However, housing permits increased 3 percent in February,” Kiefer stated in the report. “As we head into spring, home builders remain positive about home sales in the near future although the NAHB Housing Market Index dropped another 2 points to 53 in March.”

MBSQuoteline Director Joe Farr commented that rates are now even lower than what Freddie reported.

“If the survey had been conducted today, the improvement would have been even better,” Farr said in a written statement. “The rate in this survey does not include the improvement that occurred following the Fed meeting.”

For the entire month of February, 30-year fixed rates on closed loans averaged 4.008 percent, according to Ellie Mae Inc.’s Origination Insight Report. The average was down from 4.154 percent in January.

On just conventional loans,
30-year rates averaged 4.079 percent last month, Ellie reported. The average was 3.945 percent on mortgages insured by the Federal Housing Administration and 3.769 percent on loans guaranteed by the Department of Veterans Affairs.

Mortgage Daily’s analysis of Treasury market activity suggests fixed rates could be around 5 BPS lower in Freddie’s next report.

Fixed rates are likely to decline at least 3 BPS over the next week, according to 42 percent of panelists surveyed by for the week March 19 to March 25. A third predicted no change, and a quarter expected rates to rise.

At 10 BPS, the jumbo-conforming spread in the
U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended March 13 was thinner than 13 BPS seven days earlier.

Freddie’s report indicated that 15-year fixed rates averaged 3.06 percent, down from 3.10 percent in the week ended March 12. The difference between 15- and 30-year rates thinned to
72 BPS from 76 BPS in the previous report.

Fifteen-year mortgages accounted for 11.1 percent of all loan production in February, according to Ellie. The share was up from 10.8 percent in January.

Five-year, Treasury-indexed, hybrid, adjustable-rate mortgages
averaged 2.97 percent in Freddie’s survey, down 4 BPS from a week earlier.

Freddie said that the average one-year ARM
was unchanged from the previous report at 2.46 percent. But the one year was off 3 BPS from the week ended March 20, 2014.

One-year ARMs move with the yield on the one-year Treasury note, which rose to 0.26 percent Thursday from 0.24 percent the previous Thursday, according to data from the Department of the Treasury.

No change was reported by from a week earlier for the six-month London Interbank Offered Rate, which averaged 0.40 percent Wednesday.

ARM share in the most-recent Mortgage Market Index report was mostly unchanged from the prior week at 9.1 percent.

Ellie reported that ARM share tumbled to 4.0 percent in February from the prior month’s 5.1 percent.

Mortgage Expert

Mortgage Daily Staff



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