For four out of the last five weeks, 30-year fixed rates have retreated. Meanwhile, an index used on pre-crisis adjustable-rate mortgages is in danger of extinction.
On conventional loans utilized to finance the purchase of a single-family property, 30-year fixed rates for conforming loans amounts averaged 4.71 percent in May.
The average, which was reported by the Federal Housing Finance Agency,
was elevated versus the prior month, when it came in at 4.64 percent.
FHFA said its findings were based on a small survey of primary mortgage lenders.
Currently, 30-year fixed rates averaged 4.55 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended June 28.
The average declined from 4.57 percent one week prior and has been down four of the past five weeks. A year ago, 30-year fixed rates averaged 3.88 percent.
Freddie Mac Chief Economist Sam Khater noted that mortgage rates have settled down and stabilized during the last two months.
“The decrease in borrowing costs are a nice slice of relief for prospective buyers looking to get into the market this summer,” he said.
A decline of at least 3 BPS over the next week was predicted by 38 percent of panelists surveyed by Bankrate.com for the week June 27 to July 3. But another 38 percent expected no change. Just 22 percent believed rates would increase.
When the second quarter concludes on Saturday, Fannie Mae predicted in its Housing Forecast: June 2018 that 30-year fixed rates will have averaged 4.6 percent — where they are expected to remain until the end of next year.
Jumbo rates were
15 BPS lower than conforming rates in the U.S. Mortgage Market Index report from Mortgage Daily and OpenClose for the week ended June 22, widening by 2 BPS from the previous week.
Freddie’s survey had 15-year fixed rates averaging 4.04 percent, the same as last week. The spread between 15- and 30-year rates thinned to 51 BPS from 53 BPS in the last report.
Five-year, Treasury-indexed, hybrid adjustable-rate mortgages averaged 3.87 percent in Freddie report, up 4 BPS.
Fannie expected hybrid ARMs to average 3.8 percent in the current quarter, 3.9 percent in the third quarter and 4.0 percent in the final three-month period of the year.
The one-year Treasury note yield, which determines rate changes on hybrid ARMs, closed Thursday at 2.33 percent, according to Treasury Department data. The was a basis point lower than seven days earlier.
Bankrate.com reported the six-month London Interbank Offered Rate at 2.50 percent as of Wednesday, the same as the preceding Wednesday.
When LIBOR disappears in 2021, it will be replaced by the  Secured Overnight Financing Rate. The Federal Reserve Bank of New York reported SOFR at 1.90 percent as of yesterday, up 3 BPS from seven days earlier.
An announcement Thursday from the Federal Home Loan Bank of San Francisco indicated that publication of the 11th District Cost of Funds Index could cease in 2020 if there aren’t enough financial institutions eligible to report data.
COFI is an index used on some adjustable-rate mortgages, including some with negative amortization, before the mortgage meltdown. It reflects interest expense at FHLB members based in Arizona, California and Nevada.
Back at the end of 2006, there were average total funds of nearly $500 billion from 26 eligible institutions used in the calculation of the index.
But by the end of April 2018, average total funds had plummeted to under $20 billion from just nine institutions.
The FHLB noted that when the index was created, 200 savings institutions were COFI reporting members.
“The bank would like to avoid discontinuation of the indices on short notice, which could occur if there were a further drop in the number of financial institutions eligible to provide cost of funds data,” today’s statement said. “The bank believes that setting a discontinuation date for the indices well in advance would allow lenders and other users that may have mortgage loans tied to one or more of the indices sufficient time to prepare for an orderly transition.”
ARM share in the latest Mortgage Market Index report was 20.6 percent, ballooning from 15.8 percent a week earlier.
