Fixed Rates Improve, ARMs Worse

Down 3 basis points from last week, the 30-year fixed-rate mortgage averaged 5.98% in Freddie Mac’s survey of 125 lenders for the week ending May 22. A year earlier, the 30-year average was 6.37%.

The average 15-year fixed rate was 5.55%, down from 5.60% the previous week, Freddie reported.

Weaker April industrial production and falling consumer sentiment in May — to its lowest level since 1980 — helped push fixed-mortgage rates lower, Freddie Chief Economist Frank Nothaft explained in the survey.

Fixed rates tend to move with the 10-year Treasury yield, which was 3.94 early today, according to data from CNNMoney. Seven days ago, the 10-year yielded 3.86%.

A plurality of panelists surveyed by Bankrate.com, for the week May 22 to May 28 project rates will head higher, with 40 forecasting a rise, 30 projecting no change and 27 expecting rates to fall by at least 2 BPS during the next 35 to 45 days.

The 5-year Treasury-indexed ARM averaged 5.61% in Freddie’s latest survey, climbing from 5.57 a week earlier.

The 1-year Treasury-indexed ARM was also up, rising to 5.24% from 5.18% the prior week, Freddie reported.

Nothaft noted ARM indices were up on market forecasts that the Federal Reserve may cut rates any further over the near term.

The 1-year Treasury yield itself was 2.07% yesterday, down from 2.11% a week earlier, according to data from the U.S. Treasury.

Another ARM index, the London Interbank Offered Rate, was 2.80% on May 21, according to Bankrate.com. A week prior, the LIBOR yield stood at 2.83%.

Reflecting an across-the-board decline in ARM yields last week, the ARM share of new loan applications rose to 10% from 8% the prior week, according to the Mortgage Bankers Association survey of mortgage bankers, commercial banks and thrifts for the week ending May 16.

Total 1003s dropped 8% on a seasonally-adjusted basis from the prior week, leaving MBA’s Market Composite Index at 621.6. Purchase activity was off 7%, while refinance applications were down 9%. The share of applications that were for refinances was 48%, off from 49% a week earlier.