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While mortgage activity slipped for the second consecutive week, a weaker-than-expected employment report pushed rates down further — setting the stage for a jump in applications.
Despite that the Federal Open Market Committee once again raised its target for the federal funds rate by 25 basis points to 1.5%, mortgage rates did not follow in that direction. The 30-year fixed-rate mortgage came in at 5.85%, plunging 14 basis points (BPS) within a one-week time frame, according to Freddie Mac’s latest Primary Mortgage Market Survey. Meanwhile, the average for the 15-year fixed rate of 5.24% fell 16 BPS. Both are off by about a half percent from their levels a year ago. Not even the 1-year Treasury-indexed adjustable-rate mortgage (ARM) reacted to the Fed’s move as it remained unchanged from last week at 4.08%, Freddie said. A year ago, this average was 3.80%. The ARM share of mortgage applications edged up from seven days ago to 34.2%, the Mortgage Bankers Association of America (MBA) reported. “Last Friday’s unexpectedly weak employment report caused interest rates on long-term Treasury bonds and, by extension mortgage rates, to fall as investors worried about the health of the U.S. economy,” Freddie Mac economist Amy Crews Cutts said in a written statement. “The Fed’s rate hike on Tuesday was expected and the Fed’s cautiously optimistic outlook calmed the market,” Cutts added. “As a result, 30-year fixed mortgage rates should stay steady near or just below 6% for a while, giving prospective homebuyers another chance to get in with a low rate.” At Bankrate.com, 63% of the mortgage industry panelists surveyed this week said they expect mortgage rates will stay about the same (plus or minus 2 basis points), while the rest, or 37%, believe rates will rise over the next month and a half. None of the panelists think rates will fall further. Whether more consumers head to mortgage shops to take advantage of rates below 6% remains to be seen, but for now, mortgage applications edged down from the previous week, bringing the Market Composite Index to 616.1, MBA said. The decrease was due to falling purchase applications, which was reflected by the 2.7% drop in the Purchase Index, according to MBA. Refinancing activity, on the other hand, reportedly climbed up by 2.5% and broke away from a four-week descending trend. The refinance share of mortgage applications increased to 37.2% from 35.8% seven days ago, MBA said. The 10-year Treasury-note was up 15/32 at 100 9/32 in early trading, with a yield of 4.21%. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.
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