It’s been four weeks since fixed mortgage rates have fallen, and next week is likely to offer more of the same. But one adjustable-rate product managed to eke out a decline. The migration to shorter loan terms continued in the second quarter.
In its Primary Mortgage Market Survey for the week ended Aug. 16, secondary lender Freddie Mac reported that the 30-year fixed-rate mortgage averaged 3.62 percent. The 30 year was 3 basis points higher than last week but 53 BPS better than this week last year.
The last time that the 30 year moved lower was the week ended July 26, when it averaged 3.49 percent.
Expected low inflation and strengthening economic activity placed upward pressure on fixed mortgage rates, Freddie’s chief economist, Frank Nothaft, said in the report.
“For example, inflation remains in check with 12-month growth in the core consumer price index falling for a second month to 2.1 percent in July,” Nothaft explained. “At the same time, industrial production rose 0.6 percent in July compared to a 0.1 percent increase in June and retail sales jumped 0.8 percent in July from a 0.7 percent decline in June.”
Another increase in mortgage rates can be expected in Freddie’s survey next week based on Treasury market activity. The 10-year Treasury yield averaged 1.73 percent during the period which Freddie conducted its survey, while the 10-year yield closed at 1.83 percent Thursday based on data reported by the Department of the Treasury. The movement points to an increase of around 10 BPS.
Nearly two thirds of panelists surveyed by Bankrate.com for the week Aug. 16 to Aug. 22 agreed that mortgage rates will move higher, while more than a quarter saw no changes ahead and less than 10 percent forecasted a decline of at least 3Â BPS.
The premium for a jumbo mortgage tumbled to 72 BPS over conforming rates in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Aug. 10 from a jumbo-conforming spread of 78 BPS in the prior report.
A product transition report from Freddie said that 21 percent of borrowers who refinanced a 30-year fixed-rate mortgage during the second quarter reduced their terms to 15 years, while just 11 percent of 15-year borrowers refinanced into a 30-year loan.
Freddie reported that the 15-year fixed-rate mortgage averaged 2.88 percent this week, 4 BPS worse than the previous week. Fifteen-year borrowers had interest rates that were 74 BPS better than 30-year borrowers, not quite as good as the 75-basis-point discount in last week’s report.
The five-year, hybrid, Treasury-indexed, adjustable-rate mortgage was the only product tracked by Freddie to come in lower, slipping a basis point over the past seven days to 2.76 percent.
But the one-year Treasury-indexed ARM bounced off of its record-low of 2.65 percent last week to land at 2.69 percent in Freddie’s latest survey. The one-year ARM averaged 2.86 percent a year ago.
Freddie’s product transition report indicated that 97 percent of one-year ARM borrowers who refinanced in the second quarter moved into a fixed-rate loan. But the fixed-rate share of hybrid ARM refinances was lower at 81 percent.
The yield on the one-year Treasury note, which is utilized as the index on the one-year ARM, closed at 0.20 percent Thursday, the same as a week earlier, according to Treasury Department data. There was also no week-over-week change for the six-month London Interbank Offered Rate, which was 0.72 percent as of Wednesday, according to Bankrate.com.
ARM share fell for the third consecutive week in the latest Mortgage Market Index report to 2.77 percent from 2.84 percent a week prior.
