The Federal Reserve’s decision to continue its purchases of mortgage-backed securities and Treasury bonds helped pull down interest rates on home loans, and it looks like rates could fall even further.
Thirty-year fixed-rate mortgages averaged 4.50 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Sept. 19.
The latest level for the 30 year was an improvement over last week, when Freddie reported the average at 4.57 percent.
Freddie Mac Chief Economist Frank Nothaft explained that signs of a slowing economic recovery enabled rates to drift lower. He cited weak retail sales, smaller growth in industrial production and lower consumer sentiment.
“This, in part, was why the Federal Reserve chose to maintain its MBS and bond-buying program at its September 12th and 13th monetary policy committee meeting,” Nothaft said in the report. “It also cited the tightening of financial conditions observed in recent months, which in the case of the housing market means the rise in mortgage rates since May.”
But while 30-year rates fell this week, they still stood 101 basis point higher than the same week in 2012.
Next week’s survey from Freddie is likely to reflect 30-year rates that are around 5 BPS lower than this week, according to an analysis of weekly Treasury market activity.
During the three days that Freddie surveyed lenders for this week’s report, the 10-year Treasury yield averaged 2.81 percent, based on data reported by the Department of the Treasury. The 10-year yield closed at 2.76 percent Thursday.
A plurality of panelists surveyed by Bankrate.com for the week Sept. 19 to Sept. 25 agreed with Mortgage Daily’s forecast that rates will be lower over the next week. Another 36 percent predicted rates won’t move more than 2 BPS, while just 18 percent projected an increase.
The September 2013 Economic and Housing Market Outlook from Freddie has the 30 year average rising from 4.5 percent this quarter to 4.7 percent in the fourth quarter and 4.8 percent three months later.
Fannie Mae predicted in its Housing Forecast:Â September 2013 that 30-year rates would average 4.5 percent in the third quarter, 4.6 percent in the fourth quarter and 4.8 percent during the first three months of next year.
Next year, the National Association of Federal Credit Unions forecasts that 30-year rates will average 5.0 percent.
The premium for a jumbo mortgage was 27 BPS over the conforming rate, according to the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended Sept. 13, up from a 26-basis-point jumbo-conforming spread one week prior.
Freddie reported that 15-year fixed rates were 5 BPS better than in the week ended Sept. 12, landing this week at 3.54 percent. The discount for 15-year mortgages dropped to 96 BPS from 98 BPS in the previous report.
The NAFCU forecast is for 15-year mortgages to average 4.5 percent in 2014.
At 3.11 percent, five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 11 BPS less than a week ago.
Fannie expects hybrid ARMs to climb from an average of 3.2 percent in the third quarter to 3.4 percent in the final three months of 2013. During the first quarter of next year, hybrid ARMs are expected to average 3.7 percent.
A 2-basis-point decline from a week earlier left the one-year Treasury-indexed ARM at 2.65 percent. One-year ARMs averaged 2.61 percent in the week ended Sept. 20, 2012.
One-year ARMs are projected by Freddie to average 2.6 percent in the third quarter and 2.7 percent in the fourth and following quarter.
Fannie has one-year ARMs averaging 2.7 percent this quarter, 2.8 percent in the fourth quarter and 3.0 percent in the following three-month period.
The index for one-year ARMs, the yield on the one-year Treasury note, tumbled to 0.10 percent Thursday from 0.13 percent one week earlier, according to the Treasury Department’s data.
The six-month London Interbank Offered Rate saw less action this week, falling to 0.38 percent as of Wednesday from 0.39 percent a week earlier, Bankrate.com reported.
ARM share climbed to 10.8 percent in the latest Mortgage Market Index report from 10.1 percent in the week ended Sept. 6.
Freddie’s forecast for ARM share is 10 percent this quarter and 1 percentage point higher each subsequent quarter through the end of next year.
Expected ARM share in Fannie’s outlook is 7 percent for the third quarter and 1 percentage point higher each quarter through the end of 2014.
