Mortgage Market Better

The 30-year fixed-rate mortgage averaged 6.55%, sliding 8 basis points from a week ago, Freddie Mac said its latest survey of 125 mortgage-lending companies, thrifts and commercial banks showed. At this time last year, the average was 5.89%.

“The weaker than expected jobs report combined with the Fed’s decision to pass on raising rates at its last meeting led directly to lower rates this week,” said Frank Nothaft, Freddie chief economist, in a written statement.

After 17 consecutive increases of a quarter percentage point each since June 2004, the Federal Open Market Committee on Tuesday announced it decided to keep the federal funds rate target at 5.25%, citing that “economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.”

Nonetheless, Freddie’s August outlook indicates the 30-year won’t continue sliding for long, as it has it averaging 6.8% this quarter and rising to 6.9% in the second quarter 2007.

Almost three-quarters of the 100 mortgage “expert” panelists surveyed by Bankrate.com this week believed mortgage rates will go up over the next 30 to 45 days and the rest predicted rates will remain relatively unchanged.

The average for the 15-year was 6.20%, falling 7 BPS within the past seven days, Freddie said.

The 10-year Treasury, a benchmark for long-term mortgage rates, yielded 4.92% late Thursday, down 1 BPS for the day and down 3 BPS from a week earlier.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage average went down by 6 BPS to 6.21% this week, the survey showed.

The average 1-year Treasury-indexed ARM was unchanged from last week at 5.69%, according to Freddie. As of Tuesday, the 1-year T-bill itself was at 5.08%, or 3 BPS lower than a week earlier, Federal Reserve data indicate.

Departing from four consecutive weekly decreases, application volume rose 5% during the week ending Aug. 4, reflecting a 7 percent upturn in refinance requests and a 3% increase in purchase money loan demand, the Mortgage Bankers Association reported.

While the share of ARM applications reportedly remained at the lowest level since March 2004, at 28%, the portion of refinances edged up from the prior week to 38% and may continue going that route.

“Lower rates may bring about a rise in refinancing activity as homeowners with ARMs getting ready to reset decide to take advantage by locking into a fixed-rate mortgage now rather than waiting until the adjustment date when rates may be higher,” Freddie’s Nothaft said.