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| Applications remained strong while rates headed upward — a path they are expected to follow through the end of the year, according to the forecast of a prominent industry player.
Reversing two weeks of decline, the average 30-year fixed-rate mortgage increased to 5.62% from last week’s 5.53%, according to Freddie Mac’s Primary Mortgage Market Survey released today. The 15-year average climbed eight BPS to 5.20% this week, Freddie said. The current 0.42% spread between the two long-term mortgages is way off from 0.59% at this time last year. Near midday, the 10-year Treasury note yielded 4.03% with a price 100.69, better than 4.07% and 100.38 a week ago. In its July forecast, Freddie commented that it expects the 30-year will average 5.8% for the third consecutive year in 2005 due to low inflation expectations, low 10-year Treasury bond rates and Fed assurances that price stability is their number-one concern. On a quarterly basis, Freddie expects the 30-year to average 5.8% this period and 5.9% in the next quarter — a change from the previous month’s forecast that the average would hit 6.0% by the end of this year to the first quarter in 2006. None of the surveyed mortgage “experts” at Bankrate.com, however, believe rates will go up over the next 35 to 45 days, while 80% of the 100 panelists predicted rates would not change and the remaining 20% predicted rates will drop over that time. The 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly had the largest week-to-week increase — up 13 BPS to 5.19%. Up nine BPS from a week ago, Freddie said the 1-year Treasury-indexed ARM average came in at 4.33%. The 1-year Treasury bill index, reportedly used to price roughly half of all ARMs, also leapt nine BPS within the past week to 3.55% as of Tuesday, according to the Federal Reserve’s Statistical Release. The share of ARM applications nudged up from the previous week to 31%, the Mortgage Bankers Association reported. Freddie expects the share to hover close to one-third for much of this year before moving lower next year as the Fed continues to raise short-term interest rates. As for overall application activity, originators stayed busy prior to the holiday weekend with the volume of 1003s improving 10% from a week earlier — which had also seen heavy mortgage prospect traffic, MBA reported. The latest boost was generated from a 9% leap in purchase money loan requests and a 10% surge in refinance applications. The refinance share of mortgage activity reportedly edged up from the previous week closer to 46%. Freddie predicted that refis will make up 42% of applications this year and fall to 30% in 2006. In anticipation of lower rates this year, Freddie has increased its 2005 mortgage originations forecast by about $100 billion to $2.62 trillion. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com. email: [email protected]
