Short- and long-term fixed-rate mortgages took a dip this week — falling to the lowest levels on record. Expectations are that interest rates will stay near their current levels over the next week.
A 6-basis-point decline from a week ago left the average 30-year fixed-rate mortgage this week at 3.34 percent — the lowest level ever recorded by Freddie Mac. In the Primary Mortgage Market Survey for the week ended Nov. 17, 2011, the 30 year averaged 4.00 percent.
Rates reflect the post-election drop in Treasury yields as market players postured for a possible dive off of the fiscal cliff.
“Fixed mortgage rates eased this week to record lows on indicators of higher consumer confidence and lower wholesale prices,” Frank Nothaft, chief economist at Freddie, said in the report. “Consumer sentiment rose in November to the highest reading since July 2007 according to the University of Michigan.”
Rates can be expected to be about the same in next week’s survey from Freddie based on a Mortgage Daily analysis of Treasury market activity. During the days that Freddie surveyed lenders for this week’s report, the yield on the one-year Treasury note averaged 1.59 percent, according to data released by the Department of the Treasury. The 10-year yield closed at 1.58 percent Thursday.
A plurality of panelists surveyed by Bankrate.com for the week Nov. 15 to Nov. 21 agreed that mortgage rates are unlikely to move during the next week. A third predicted an increase of at least 3 BPS, and a quarter forecasted a decline.
In its November 2012 U.S. Economic & Housing Market Outlook, Freddie predicted that 30-year mortgages will average 3.4 percent in the fourth quarter and the following quarter then rise 10 BPS each quarter for the rest of next year.
Thirty-year jumbo mortgages were priced at a 58-basis-point premium over their conforming counterparts in the U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended Nov. 9, better than the 63-basis-point jumbo-conforming spread the prior week.
Freddie reported that the 15-year fixed-rate mortgage also fell to an all-time low, averaging 2.65 percent this week versus 2.69 percent in the previous report. The 15-year mortgage wasn’t as attractive this week, with 15-year rates coming in 69 BPS lower than 30-year rates. Last week, that spread was 71 BPS.
A 1-basis-point rise from last week for the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage left this week’s average from Freddie at 2.74 percent.
But the one-year Treasury-indexed ARM improved, falling to 2.55 percent from 2.59 percent a week earlier and 2.98 percent a year earlier.
Freddie predicts that the one-year ARM will average 2.6 percent this quarter then rise 10 BPS each quarter through the end of 2013.
The underlying index for the one-year ARM, the yield on the one-year Treasury note, closed at 0.17 percent Thursday, lower than 0.20 percent seven days prior, according to Treasury Department data.
The six-month London Interbank Offered Rate — which, like the one-year Treasury yield is used to determine payment and rate adjustments on ARMs — was 0.52 percent as of Wednesday, down from 0.53 percent a week earlier, according to data from Bankrate.com.
ARM share edged up to 2.27 percent in the latest Mortgage Market Index report from 2.26 percent the previous week.
ARM share is expected by Freddie to average 11 percent this quarter then rise 1 percentage point each quarter of next year.
