The following are excerpts from the HSH Associates (www.HSH.com ) newsletter for the week ending August 22, 2008:
“rates were steady to slightly lower for the week. HSH’s Fixed Rate Mortgage Indicator (FRMI), the average interest rate for all 30-year FRMs — including conforming, jumbo and expanded conforming offerings — slid below the 7% threshold for the first time in four weeks, closing our national survey at 6.99%, a three basis point (.03%) decline. All the decline this week came from the conforming side of the equation, as conforming 30-year fixed-rate mortgages declined by eight basis points, while private-market 30-year FRM jumbos remained unchanged for the week.
Out of the (last) 1100 weeks , spreads for the conforming 30-year FRM over the 10-year TCM were higher than the present (adjusted) 278 basis points in only 32 weeks. If spreads were near those seen before the credit mess swamped the markets last year at this time, conforming mortgage rates would average in the mid-5% range right now, providing considerable additional support to challenged housing markets. As time progresses forward and balance is slowly restored, some of that demand for higher premiums should fade as more profits can again be recycled into more lending.
However, it is a reasonable assumption that when home prices finally stop falling and begin to firm that the fat spreads available in mortgage investments will bring investor money out of hiding. When that will happen is an open guess, but possibly over the next few quarters. Some spread premium would also disappear if inflation cools.
Moribund housing markets may be trending to their bottoms.Since the housing bill was passed several weeks ago, mortgage rates have been pretty flat as the summer doldrums finally hit the markets. There’s no reason to believe that mortgage rates are likely to fall by much anytime soon, no matter how weak the economic data. ”
|30 yr fixed mtg||6.36%||6.40%|
|15 yr fixed mtg||5.84%||5.92%|
|30 yr fixed jumbo mtg||7.44%||7.52%|
|5/1 jumbo ARM||6.38%||6.35%|