Long-term fixed rates on home loans declined to the lowest level so far this year, and all indications are that they won’t be any higher in the next report.
Secondary lender Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Thursday that 30-year fixed rates averaged 4.10 percent.
That was the lowest average for long-term mortgage rates during any week this year, according to historical survey data.
During the previous week, 30-year rates averaged 4.12 percent, while the average was 4.58 percent during the same week last year.
In July, thirty-year rates averaged 4.388 percent, according to Ellie Mae’s Origination Insight report. The average was down from 4.421 percent in June.
Thirty-year rates aren’t likely to be much different in Freddie’s next report based on this week’s Treasury market activity.
Fixed mortgage rates tend to track the 10-year Treasury yield, which averaged 2.41 percent during the period Freddie was surveying lenders this week, based on Treasury data. The 10-year yield closed at 2.41 percent Thursday.
A majority of panelists surveyed by Bankrate.com for the week Aug. 21 to Aug. 27 were in agreement with Mortgage Daily’s forecast and predicted that mortgage rates won’t move more than 2 BPS over the next week. An increase was projected by 38 percent, and just 8 percent forecasted a decline.
On a longer term basis, Fannie Mae predicted in its Housing Forecast: August 2014 that 30-year rates will average 4.2 percent in the third quarter and 4.3 percent during the following three months.
Minutes from the July 29 and July 30 Federal Open Market Committee meeting indicate that ongoing improvement in the labor market prompted a decision to reduce adding to its holdings of agency mortgage-backed securities to $10 billion a month from $15 billion a month. The reduction began this month. Monthly additions to its Treasury bond investments were cut to $15 billion from $20 billion.
“The committee again judged that, if incoming data broadly supported its expectations that labor market indicators and inflation would continue to move toward mandate-consistent levels, the committee would likely reduce the pace of asset purchases in further measured steps at future meetings,” the FOMC statement said. “However, the committee reiterated that asset purchases were not on a preset course and that its decisions remained contingent on the outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.”
In the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Aug. 15, interest rates on jumbo mortgages were 12 BPS less than conforming rates. The jumbo-conforming spread widened from a negative 9 BPS the previous week.
This week’s average 15-year fixed rate was 3.23 percent, Freddie’s report indicated, a basis point better than in the week ended Aug. 14. The spread between 15- and 30-year rates narrowed to 87 BPS from 88 BPS in the previous report.
Ellie said 8.9 percent of borrowers in July opted for a 15-year mortgage. The share was down from 9.0 percent in June.
At 2.95 percent, five-year, Treasury-indexed, hybrid, adjustable-rate mortgages averaged 2 BPS less than a week earlier, Freddie reported.
Fannie expects hybrid ARMs to average 3.0 percent in the three months ended Sept. 30 and 3.2 percent during the following quarter.
A 2-basis-point increase from Freddie’s last survey left one-year Treasury-indexed ARMs averaging 2.38 percent. One-year ARMs were 2.67 percent in the week ended Aug. 22, 2013.
The one-year ARM is projected by Fannie to go from 2.4 percent in the third quarter to 2.5 percent in the following three-month period.
The one-year Treasury yield, which determines rate and payment changes on one-year ARMs, was 0.10 percent Thursday, the same as a week earlier, according to the Treasury Department.
No change from seven days earlier left the six-month London Interbank Offered Rate at 0.33 percent on Wednesday, Bankrate.com reported.
Ellie reported ARM share at 6.5 percent for last month, thinning from 7.2 percent in June.
ARMÂ share was 11.0 percent in the latest Mortgage Market Index report, thinning from 11.4 percent one week prior.
Fannie predicts that ARM share will rise from 10 percent this quarter to 11 percent in the fourth quarter.
