Interest rates on home loans dropped to a nine-month low and, barring a less-than-stellar employment report tomorrow, could fall further.
In the Primary Mortgage Market Survey for the week ended Feb. 4 from Freddie Mac, 30-year fixed rates averaged
3.72 percent.
That turned out to be the lowest level for the 30 year since April 30, 2015, when Freddie’s survey had the average coming in at 3.68 percent.
Freddie Mac Chief Economist Sean Becketti explained in the report that fixed rates declined as continued market volatility prompted
a flight to quality.
“These declines are not what the market anticipated when the Fed raised the Federal funds rate in December,” Becketti stated in the report.
Thirty-year fixed rates averaged 3.79 percent in the week-earlier report and 3.59 percent in the year-earlier report.
There has been further improvement in mortgage rates since Freddie surveyed lenders this week.
“MBS prices have improved some since Monday when many of the respondents completed the Freddie Mac rate survey,” MBSQuoteline Director Joe Farr said in a written statement. “Mortgage rates on Thursday may actually be a little lower than what the survey shows.”
Another four-basis-point drop or so could hit fixed rates in Freddie’s next report based on a Mortgage Daily analysis of Treasury market activity.
A plurality of panelists surveyed by Bankrate.com for the week Feb. 4 to Feb. 10 predicted that mortgage rates will retreat at least three BPS over the next week. Another 31 percent saw no changes ahead, and just 23 percent projected an increase.
Bankrate.com Chief Financial Analyst Greg McBride said that only a strong report on Friday can change the trajectory of mortgage rates over the next week.
“A strong employment report may halt the declining trend in mortgage rates, but anything less than a stellar report will only further feed concerns about an economic slowdown,” McBride said in a written statement.
Freddie predicted in its January 2016 Economic and Housing Market Outlook that the 30 year will average 3.1 percent this quarter, 3.3 percent in the second quarter and 3.6 percent three months later.
Prospective borrowers on jumbo mortgages were quoted rates that were 18 BPS lower than conforming rates in the U.S. Mortgage Market Index report from OpenClose and Mortgage Daily for the week ended Jan. 29. The jumbo-conforming spread thinned from a negative 25 BPS the previous week.
At 3.01 percent, 15-year fixed rates were down six BPS from the week ended January 28, 2016, in Freddie’s survey. The latest movement put the spread between 15- and 30-year mortgages at 71 BPS,
a basis point thinner than in the last report.
Freddie reported hybrid, five-year, Treasury-indexed, adjustable-rate mortgages at
2.85 percent, a five-basis-point week-over-week improvement.
Freddie’s forecast calls for hybrid ARMs to average 3.1 percent in the first quarter, 3.3 percent in the following three-month period and 3.6 percent in the third quarter.
One-year ARMs averaged 2.14 percent as of Wednesday, according to HSH.com. The one-year average plunged from a previously reported 2.57 percent last week. Freddie previously reported the one year at 2.39 percent as of the week ended Feb. 5, 2015.
One-year ARMs adjust based on changes in the one-year Treasury yield, which the Treasury Department reported at 0.52 percent as of Thursday, rising from 0.47 percent seven days previous.
Some other ARMs adjust with the six-month London Interbank Offered Rate, which was reported by Bankrate.com at 0.86 percent as of Wednesday. LIBOR was also reported at 0.86 percent one week prior.
ARM share was 9.7 percent in the latest Mortgage Market Index report, widening from 8.6 percent a week earlier.
