Rates retreated, mortgage applications strengthened and adjustable-rate activity increased during the latest week.
Tumbling 17 basis points from last week, the average 30-year fixed-rate mortgage was 5.12% in Freddie Mac’s weekly survey of 125 thrifts, credit unions, commercial banks and mortgage lenders for the week ended Aug. 20. During the same week last year, the 30-year was 6.47%.
In its August 2009 Economic and Housing Market Outlook, Freddie predicted that the 30-year will average 5.3% this quarter, up from 5.0% in the second quarter. By the fourth quarter, the 30-year is forecasted to rise to 5.4%.
The 15-year was down a more moderate 12 BPS from last week to 4.56%, Freddie reported.
Freddie’s chief economist offered no explanation why rates retreated.
Mortgage rates are likely to continue lower based on a 19 basis point decline in the 10-year Treasury from a week ago to 3.465%.
In Bankrate.com’s survey for the week Aug. 13 to Aug. 19, a plurality of the 100 panelists — 39 — predicted rates will remain within 2 BPS of their current levels during the next 35 to 45 days. Another 38% foresaw a decline, while 23% expected rates to rise.
Freddie said the five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.57%, 18 BPS better than in the previous survey.
The one-year Treasury-indexed ARM averaged 4.69, just 3 BPS below Freddie’s prior survey. The one-year averaged 5.29% a year earlier.
The underlying one-year Treasury bill yield fell to 0.43% yesterday from 0.47% the prior Wednesday, according to U.S. Treasury data.
The six-month London Interbank Offered Rate also improved — falling to 0.83% yesterday from 0.89% seven days earlier, according to Bankrate.com. Changes in LIBORÂ impact many subprime borrowers.
Reflecting last week’s one-year ARM improvement as fixed rates climbed, the ARM share rose to 6.5% from the prior week’s 5.8% in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Aug. 14.
Freddie predicted the third-quarter ARM share will ease to 2% from the prior quarter’s 3%. The fourth-quarter ARM-share projection was also 2%.
Overall applications were up 6% on a seasonally adjusted basis in MBA’s survey. Purchases were up 4%, while refinances rose 7% and the refinance share increased to 53% from 52%.
Freddie’s forecast calls for the refinance share to drop to 55% this quarter from 70% in the second quarter. Refinance share is expected to remain at 55% in the fourth quarter.
