Fannie Forecasts Falling Fixed Rates

The 30-year fixed-rate mortgage averaged 6.16%, ticking up 2 basis points from a week ago, Freddie Mac’s latest Primary Mortgage Market Survey indicated. At this time a year ago, the average was at 6.32%.

Fannie Mae’s latest forecast has the 30-year averaging 6.23% this quarter and then dipping to and remaining at 6.15% for the rest of the year. Such outlook contrasts those released this month by the Mortgage Bankers Association and Freddie Mac, which respectively see the 30-year increasing to end the year at 6.6% and 6.4%.

The 15-year average, at 5.90%, also stepped up 2 BPS from last week, Freddie said.

The 10-year Treasury note yielded 4.58% at the market’s close today, up from 4.54% last Thursday.

The mortgage “experts” surveyed by Bankrate.com this week advised loan prospects to wait for rates to go down rather than locking; as 62 out of 100 panelists predicted rates will remain relatively unchanged over the next 35 to 45 days, another 23 forecast they’d fall and 15 foresaw an upturn.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage climbed above the 15-year fixed rate to average 5.91%, or 1 BPS higher than a week earlier.

Down 2 BPS to 5.40% this week was the average for the 1-year Treasury-indexed ARM, Freddie reported. The 1-year Treasury itself bill fell 2 basis points from a week earlier to 4.89% on Wednesday, according to Federal Reserve data.

The ARM share of total applications descended from the previous week to 22%, MBA announced.

Fannie believes ARM demand will remain at or slightly drop from current levels throughout the remainder of the year partly because, although spreads between rates on fixed and adjustable mortgages are expected to widen somewhat as the Fed eases monetary policy later this year, long-term fixed rates will continue at a low level.

“Mortgage rates were stable this week as the bond market took readings on producer prices and consumer prices in stride,” said Frank Nothaft, Freddie Mac chief economist. “Excluding food and energy, core inflation at the wholesale level was up more than had been anticipated in February, but at the retail level the increase was in line with expectations. Weighing the relevant factors, The Fed decided to leave the target federal funds rate unchanged at 5.25 percent.”

Mortgage application volume fell about 3 percent during the week ending March 16 mostly due to refinance requests falling 5 percent, MBA reported. The refinance share was 45 percent.

Meanwhile, purchase money application activity dropped 1 percent, demand for conventional loans decreased 3 percent and government-insured applications declined 1 percent, MBA said.