Mortgage Activity Remains High Despite Continued Rate Climb

Secondary lender Freddie Mac reports another 15 basis point jump in fixed rates

July 18, 2003

By ANNE LINEBERRY

In its Primary Mortgage Market Survey, Freddie reported the average 30-year rate at 5.67 percent and the average 15-year rate at 5.00 percent, both 15 basis points higher than the prior week. Both rates carried an average of 0.5 discount points.

This upward move marks the third week in a row that rates have shot upward by more than 10 basis points, according to Freddie. In weekly reports, the secondary lender has reported the 15-year rate on a steady climb for the last five weeks, and the 30-year springing upward for the last four weeks in a row.

This time last year, fixed rates were less than one full point higher than they are now, Freddie said.

Bankrate.com industry analysts say that the market is reacting to optimistic economic comments by Alan Greenspan, chairman of the Federal Reserve Board, made to members of Congress earlier this week.

Forty-six percent of those taking the survey predicted rates would go up farther in the short term. Only 23 percent see rates remaining the same, and the remainder, 31 percent, see rates falling back down.

The ten-year Treasury bond averaged 3.92 percent at the close of business Thursday, up significantly over last week’s close of 3.66 percent.

Frank Nothaft, chief economist for Freddie, credited Greenspan’s comments to this rise as well.

“Fed Chairman Greenspan told members of Congress this week that he was ‘optimistic’ that the economy will grow more quickly in the second half of this year and into 2004, explaining ‘statistic by statistic’ of recent releases of economic data were stronger than market expectations. As a result, bond yields rose dramatically over the week, bringing long-term mortgage rates up along with them,” he said.

Mortgage Bankers Association of America (MBA) reported increased mortgage application activity for the week ended July 11. The Market Composite Index of mortgage loan applications was 1358.2 on a seasonally adjusted basis, slightly higher than the 1346.3 reported for the prior week.

According to the Weekly Mortgage Applications Survey, both the refinance and government indices were down, but the purchase and conventional indices were up.

Refinance as a share of all applications dropped again, comprising 70.1 percent of total applications, MBA said. In the prior week, refinances were 72.1 percent of the total.

MBA’s Three Year Mortgage Finance Forecast predicts 30-year fixed rates averaging 5.7 percent in the third quarter of 2003.

Anne Lineberry is MortgageDaily.com‘s editor. She previously worked as an online editor/producer for DallasNews.com and on the Metropolitan desk for the print edition of The Dallas Morning News. Email Anne at AnneLineberry@MortgageDaily.com