Fixed-related mortgage rates moved off their record lows of last week as the market became less risk averse on optimism regarding EU's debt crisis, as well as, on better than expected employment news. 

According to Freddie Mac's mortgage rate survey for the week ending October 13, 30-year fixed mortgage rates averaged 4.12% with an average 0.8 point, up 18 basis points over the week. This places the no point rate above 4.30% and reduces the refi incentive for borrowers underlying the 4.0% coupon. 

Rates jumped a sizeable 11 and 10 basis points for 15-year fixed and 5/1 hybrid ARM, respectively, to 3.37% and 3.06%, while one-year ARM rates declined five basis points to 2.90%.   

In a note earlier this week from Deutsche Bank, analysts noted that originators had raised 30-year fixed mortgage rates over the past week to an average of 4.27% from 4.05% "in a clear signal that refinancing volume is too high to handle." 

This is due to capacity constraints which do not look to be alleviated any time soon.  UBS looked into the BLS employment data for mortgage, nonmortgage loan brokers and real estate credit and found that except for a one-month uptick in May, mortgage financing employment has dropped every month. It currently stands at 234,000, said analysts, down from 262,000 in October 2010.  UBS suggested that lenders are reluctant to add due to regulatory uncertainty, fear of put-backs, and the severe duress financials are facing. 

Scott Buchta, Managing Director at Sandler O'Neill & Partners, said that capacity constraints may cap the refi index in the 4000-5000 range for the foreseeable future.  Yesterday, the MBA reported the Refi Index increased just 1.3% to ~4072 for the week ending October 7. This is down nearly 4% from its most recent high of 4240 for the week ending September 23 and well off 2011's high of 4867 hit in mid-August.


Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.