Rate Outlook Unclear

Mortgage applications came in at 1083.1 for the week ending Feb. 7, down 5.1% from the previous week, according to Mortgage Bankers Association of America’s weekly index. Last year at this time, the application index rang in at 581.7.

Refinancing represented 73.8% of last week’s applications, barely increasing from the previous week. Refinancing only represented just more than half of applications this time last year.

Like refinances, the 30-year fixed-rate mortgage didn’t move much from week-to-week. Freddie Mac’s weekly survey found the average to be 5.86% for the week ending Feb. 14, down just slightly from last week’s 5.88%. The 30-year at this time in 2002 was a percentage point higher than this week.

“Low rates have also kept the refinance market bustling and the reduced interest rate on mortgage gave homeowners about $100 more per month to spend or save last year,” said Freddie’s chief economist Frank Nothaft.

The survey found the North Central states had the highest 30-year at 5.95% this week, and the Western states had the lowest at 5.79%.

The 15-year averaged 5.26%, only a basis point (bp) down from last week but much lower than the 6.35% of last year. The one-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 3.89% this week, which is the third week in a row it’s remained the same. Last year, the ARM averaged 4.98%.

Mortgage rates, refinancing, and the housing market in general are at a crossroads right now, the head of mortgage strategy at Deutsche Bank told Dow Jones Newswires.

Besides the buzz of a U.S. attack on Iraq, “the markets are looking at the world with rose-colored glasses, with really no negative events priced into the market,” such as a terrorist attack here in America or another major corporate scandal, said Alec Crawford. The refinance boom could pick up speed again if such an even was to occur, he said.

However, if the Iraq crisis ends in a quick resolution, bond yields will shoot higher and drag mortgage rates with them, he said. “Then we’ll see refis get choked off.”

More than half of Bankrate.com’s mortgage experts polled in its weekly survey said rates should hover over the next 30 to 45 days. A little more than one-quarter said rates will decrease, and 18% said they’ll go up.

“Hanging in a very narrow range — typically a sign that a big move is about to happen,” said Brian Peart, president of Nexus Financial in Atlanta, to Bankrate.com. “The question is whether it’s up or down.”The 10-year Treasury note yield was up a whopping 9 BP during late-morning trading, but its yield still remained below four percent at 3.87%. The price was down $0.6525 to 99 11/32.