The average weekly Freddie Mac survey rate for the 30-year fixed rate mortgage dropped 5 basis points during the week ending Dec. 15, returning to its record low of 3.94% for the first time since the week ending Oct. 6.
Not only did the 30-year hit a record low in the most recent week but the 15-year FRM and five-year Treasury-indexed hybrid set new record lows, with the former dropping 6 bps to 3.21% and the latter falling 7 bps to 2.86%.
The drop in most rates came amid what Freddie Mac chief economist Frank Nothaft called in his weekly report “a rough environment for housing." Specifically he noted that there has been continued Fed pessimism about the sector, a nine-month decline in home equity values, and a slight increase in 90-plus day mortgage delinquency rates between the second and third quarters.
The long-term rate-indicative 10-year Treasury yield dropped as low as 1.9% during the most recent week as markets in general slumped.
But in contrast to other rates tracked by Freddie Mac in the most recent week, the average rate for the shorter-term one-year Treasury adjustable-rate mortgage inched up by a basis point to 2.81%.
Recent forecasts generally suggest rates will stay about where they are in 2012, at least in the short-term, although the Fed has acknowledged some hints of growth in the larger economy.
"In the short-run...we expect interest rates to remain low,” said Grant Bailey, head of residential mortgage-backed securities at Fitch Ratings, in a conference call on the outlook for next year. But he also noted that, longer-term, he believes the possibility of payment shock from an upward movement in rates is “potentially is a risk.”
Average points were highest in Freddie Mac's survey for 30- and 15-year FRMs at 0.8 of a point. Points were lower for five-year Treasury hybrids and one-year Treasury ARMs at 0.6 of a point.
