Bond Yields Drive US Long-Term Mortgage Rates to Higher Levels

Freddie Mac (NYSE:FRE) yesterday released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.46 percent with an average 0.7 point for the week ending October 30, 2008, upfrom last week when it averaged 6.04 percent.  Last year at this time, the 30-year FRM averaged 6.26 percent. 

The 15-year FRM this week averaged 6.19 percent with an average 0.7 point, up from last week when it averaged 5.72 percent.  A year ago at this time, the 15-year FRM averaged 5.91 percent. 

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.36 percent this week, with an average 0.7 point, up from last week when it averaged 6.06 percent.  A year ago, the 5-year ARM averaged 5.98 percent. 

One-year Treasury-indexed ARMs averaged 5.38 percent this week with an average 0.6 point, upfrom last week when it averaged 5.23 percent.  At this time last year, the 1-year ARM averaged 5.57 percent. 

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“Long-term mortgage rates followed long-term Treasury bond yields higher this week, pushing fixed-rate mortgages up to levels of two weeks ago,” said Frank Nothaft, Freddie Mac vice president and chief economist.  “The Federal Reserve’s 0.50 percentage point cut in the discount rate and federal funds target rate on Wednesday was widely anticipated in the financial markets and is likely to keep short-term interest rates low; consequently, initial interest rates on ARMs, which tend to be set relative to other short-term rates, may remain near current levels.

“In other news, house-price declines in many markets have improved housing affordability and stimulated home sales.  In September, sales of existing homes rose 5.5 percent while sales of new homes were up 2.7 percent, at a seasonally-adjusted annual rate.” 

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

PRIMARY MORTGAGE MARKET SURVEY RESULTS

30-YEAR FIXED RATE MORTGAGES

15-YEAR FIXED RATE MORTGAGES

5/1 ADJUSTABLE RATE MORTGAGES (ARMs)

Margin                        2.75                2.72               2.75                2.77                2.78             2.73

1-YEAR ADJUSTABLE RATE MORTGAGES (ARMs)

Margin                        2.76                2.74               2.75                2.73                2.80             2.77

THE NATIONAL MORTGAGE RATE SNAPSHOT

Freddie Mac's Primary Mortgage Market Survey (PMMS) is for informational purposes only and Freddie Mac is not responsible for business decisions made based on the reported results of the PMMS.  Freddie Mac may change the methodology used to conduct the PMMS survey at any time and without notice.