30-Yr Fixed Conforming at 5.07%: 10-Week Lowby Tim Manni
According to the latest issue of HSH.com’s Market Trends Newsletter, “The all-important 30-year fixed conforming average slipped to 5.07% [last week],” a 10-week low point:
[Last] week, the overall average for 30-year fixed-rate mortgages tracked by HSH.com’s FRMI sported a decline of six basis points (.06%), ending HSH.com’s survey week at 5.34%, the lowest such average since mid-December 2009. The FRMI includes conforming, jumbo and the GSE’s “high-limit” conforming products in its calculation. The average interest rate for the FRMI’s Hybrid 5/1 ARM counterpart lost a full tenth-percentage point (.10%) during the latest survey cycle, closing the survey week at 4.48%.
The all-important 30-year fixed conforming average slipped to 5.07%, also a ten-week low point.
Mortgage rates eased back [last] week despite a pretty good tone for the economic data. Friday’s employment report did nudge the 10-year Treasury about seven basis points higher, suggesting that the decline in rates could reverse somewhat during [this] week. Rates might also be boosted by comments made by House Financial Services Chairman Barney Frank, who noted that holders of Fannie and Freddie debt should not consider their investments to be 100% backed by the US government, even though the companies are now under Federal control. He went on to say that when the companies are ultimately restructured, he wants to reserve the right to have debt holders take a “haircut” (a reduction in the value of their investments). If private-market investors choose to sell their holdings of Fannie and Freddie debt or not buy newly-issued debt, the GSE’s cost of funds would rise, and so would mortgage rates. Of course, the Treasury continues to provide unlimited support to these entities; perhaps Mr. Frank hoped to spook investors in order to make Fannie and Freddie even less private and more beholden to the government than they already are? It’s hard to know if that was the intention, but it could certainly be the effect.
Residential mortgage rates will probably firm up a little bit [this] week. How much depends upon how investors ultimately perceive Mr. Frank’s remarks, but we expect a couple of basis points increase even without those effects.
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