Rates Tumble to Lowest Point Since Last Summer

Sinking 21 basis points (BPS) from the previous week to the lowest level since July 11, 2003, the 30-year fixed-rate mortgage came in at 5.66%, said Freddie Mac in this week’s Primary Mortgage Market Survey. Last year at this time, it was at 5.97%.

The 15-year followed by dropping 20 BPS from the prior week to 4.97%, also the lowest since July, said Freddie.

The mortgage giant averaged one-year Treasury-indexed adjustable rate mortgages (ARMs) at 3.62%, a slight drop from the previous week’s level, and nearly that of mid-July’s lower average of 3.58%. The ARM share of application activity decreased about 4% to 26.6%, said the Mortgage Bankers Association of America (MBA). In its 2004 economic forecast, Freddie predicted the ARM share will average 24%.

“The lack luster employment report had a chilling effect on the market’s recent exuberance, causing mortgage rates to slide to this week’s low levels,” said Amy Crews Cutts, Freddie’s deputy chief economist, in a prepared statement. She highlighted that financial markets “were taken aback” when December’s employment report showed the number of new jobs grew by about 1,000, way off the 150,000 that were expected.

At Bankrate.com, senior financial analyst Greg McBride pointed out that “a job hunter’s misery is a mortgage hunter’s glory” and advised consumers to lock on their loans before rates respond to possible positive economic indicators. However, Freddie Mac’s Cutts said that while the economy looks to be moving from job-loss recovery to an almost inflation-less recovery, mortgage rates will remain low and affordable.

Bankrate.com’s weekly survey of mortgage industry experts’ predictions showed that 50% of them expect a downturn in rates within the next month and a half, 30% say they will remain unchanged and 20% expect an upturn.

For the week ending Jan. 9, mortgage loan application activity grew 17.1% from the prior week, bringing the Market Composite Index to 702.6, according to the MBA. A year ago, the Weekly Mortgage Application Survey showed the index at 1154.3.

MBA said the Refinance Index jumped 25.1% to 2195.7, while refinances edged up about 2% and accounted for 51.6% of total applications. The refinance share is expected to sink to 37% this year, according to Freddie.

The most significant increase in the MBA’s survey was seen in the Government Index as it jumped 38% to 292.7. However, some lenders missed out on this segment as HUD recently revoked their FHA lending authority.

The 10-year Treasury note closed Thursday at a yield of 3.97% and a price of 102.21875, while a week ago the figures were 4.25% at closing and 99 29/32, respectively. The yields are close to what Freddie predicts will be the average this year — 4.3%.