Rate News

Mixed Mortgage Market

Average 30-year 4.75%

June 17, 2010

By SAM GARCIA




Loan activity was lower, refinance share fell and the jumbo spread was wider this week. But adjustable rates were lower and fixed rates were mixed.

The average 30-year fixed-rate mortgage moved 3 basis points higher from last week to 4.75 percent in Freddie Mac's latest weekly survey of 125 mortgage lenders. The 30-year was 5.38 percent one year ago. Freddie forecasts that the 30-year will average 4.9 percent in the second and third quarters then rise to 5.0 percent in the fourth quarter.

The conventional 30-year was 4.763 percent in the Mortech-MortgageDaily.com Mortgage Market Index report for the week ended June 16, lower than the prior week's 4.780 percent. But the jumbo 30-year rose 1 basis point to 5.680 percent, pushing to conventional-jumbo spread to 92 BPS from last week's 89 BPS.

Mortgage rates might fall further based on the yield on the 10-year Treasury bond, which fell to 3.21 percent today from 3.33 percent last Thursday, according to data from the U.S. Department of the Treasury.

However, nearly two-thirds of Bankrate.com panelists for the week June 17 to June 23 predicted mortgage rates will remain within 2 BPS of their current levels during the next week. More than a third predicted an increase and none expected a decline.

Like the 30-year, the 15-year fixed-rate mortgage was 3 BPS higher in Freddie's report, averaging 4.20 percent. The Mortgage Market Index report indicated that the 15-year fell to 4.140 percent from 4.180 percent.

In Freddie's report, the five-year Treasury-indexed hybrid adjustable-rate mortgage improved 3 BPS to 3.89 percent.

A much bigger decline -- 9 BPS -- occurred with the one-year Treasury-indexed ARM, which averaged 3.82 percent in Freddie's survey. The one-year was 4.95 percent a year prior and hasn't been this low since the week ended May 6, 2004, when it averaged 3.76 percent. The secondary lender expects the one-year to average 4.1 percent this quarter then climb to 4.2 percent in the final quarter of this year.

The one-year ARM's index, the yield on the one-year Treasury bill, closed today at 0.28 percent, 6 BPS better than a week prior. The yield on the six-month London Interbank Offered Rate was 0.75 percent yesterday, Bankrate.com reported. LIBOR was unchanged from the prior Wednesday.

ARM share edged up to 5.2 percent from 5.1 percent the prior week in the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ended June 11. ARM share rose despite last week's bigger decline in the 30-year.

Mortgage activity declined 6 percent this week, with the Mortgage Market Index coming in at 257, down from 274 seven days earlier. The average U.S. loan amount fell to $211,982 from $215,771 last week. Washington, D.C.'s, $300,066 was the highest average loan amount, and North Dakota's $151,279 was the lowest.

This week, refinance share edged lower in the Mortech-MortgageDaily.com report, with refinances representing just under half of activity, off from half last week. Rate-term refinance share was 35 percent, and cashout refinance share was 14 percent.

Last week, mortgage applications increased 18 percent on a seasonally adjusted basis in MBA's survey. Purchases were up 7 percent, and refinances were 21 percent higher -- pushing the refinance share to 75 percent from the previous week's 72 percent.

Freddie projects the refinance share of applications will be nearly two-thirds this quarter then fall to 45 percent in the third quarter and to one-fourth by next year.