The 30-year fixed-rate mortgage (FRM) slightly declined this week, according to the results of the Primary Mortgage Market Survey (PMMS) conducted by the Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).
Freddie Mac reports 15-year FRM increased
The government controlled mortgage giant Freddie Mac said the average 30-year FRM for the week ending January 9 was 4.51%, lower than the average 4.53% recorded last week. During the same period a year ago, the average rate was 3.40%.
Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) also reported that this week’s 15-year FRM increased a bit from 3.55% in the previous week to 3.56%. Last year, the average rate was 2.66%.
The average rate for the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) this week was higher at 3.15% compared with 3.05% last week, and 2.67% in the same period in 2013.
The average rate for the 1-year Treasury-indexed ARM remained at 2.56%. During the same week last year, the average rate was higher at 2.60%.
Few economic reports
In a statement, Frank Nothaft, vice president and chief economist at Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) explained that the changes in the mortgage rates were little because there were few economic reports during the week.
Some of the economic reports this week include the report from the ADP research Institute that the private sector added approximately 238,000 jobs in December, which is higher than the consensus estimates of economists. The Institute for Supply Management also reported a slow growth in the non-manufacturing industry last month compared with the forecasts of the market.
Federal Reserve bond-buying lowered mortgage rates
The $85 billion monthly bond-buying program of the Federal Reserve helped lower the 30-year FRM below 4% last year. The average rate last year declined to as low as 3.4% by the end of that year.
However, the Federal Reserve announced that it would start reducing its monthly asset purchases citing that the economy is growing faster than expected. As a result, the average mortgage rates increased.
CFPB released mortgage rules
Meanwhile, the Consumer Financial Protection Bureau (CFPB) released new mortgage rules requiring lenders to determine if borrowers actually have the ability to repay their home loans. The new rules also prohibit practices that contributed to the cause of the mortgage crisis such as approving mortgages with little or no documentations, loans with unusually high fees, and prepayment penalties, and allowing borrowers to pay small amounts so that the loan balance would increase instead of going down.
According to Keith Gumbinger, vice president of HSH.com, a firm that tracks mortgage rates, the new mortgage rules has little impact to restrict credit availability. He opined, "Lenders have been deeply scrutinizing borrower applications for several years, requiring plenty of documentation and doing their best to make certain that borrowers can afford the loan. Until Friday, that's been a kind of market-enforced discipline.”