Rates Up, Apps Off

Rising 8 basis points from last week, the 30-year fixed-rate mortgage average came in at 6.42%, according to Freddie Mac’s Primary Mortgage Market Survey for the week ending today. At this time last year, the average was 11 BPS lower.

At 6.09%, the 15-year average reportedly jumped 11 BPS from a week earlier.

However, the 10-year Treasury note yield, which long-term mortgage rates tend to follow, was at 4.57% near midday, 12 BPS lower than last Thursday.

Freddie’s latest forecast has the 30-year average staying at its current level next quarter, coming down from 6.6% this quarter.

Over the next month and half, however, six out of 10 of the mortgage bankers, mortgage brokers and others in the industry surveyed by Bankrate.com this week think rates will go up. The rest were almost evenly split among those who think rates will fall and those who predict they’ll remain relatively unchanged.

Contrary to long-term mortgage rates, averages on Treasury-indexed adjustable-rate mortgages went lower, with the 5-year hybrid tumbling 6 BPS to 6.15% this week and the 1-year ARM falling 5 BPS to 5.60%, Freddie reported. The yield on the 1-year Treasury bill itself slid 4 BPS in a week’s period to 4.04% Tuesday.

Despite declining short-term mortgage rates, Freddie noted the ARM share of mortgage applications — reported at 12% by the Mortgage Bankers Association for the week ending Sept. 21 — is at the lowest level since March 2003.

Overall mortgage application volume decreased 3 percent from a week earlier, as a 7 percent downturn in purchase money demand overshadowed a 3 percent increase in refinance requests, MBA reported Wednesday. The refinance share went up to 46% from 44% a week earlier.

A large number of borrowers have been opting for the 30-year, according to an announcement of the third quarter 2007 U.S. Mortgage Payment Index by Susan M. Wachter, professor of Real Estate and Finance at the University of Pennsylvania’s Wharton School. As demand for ARM applications has dropped by almost 47 percent from September 2006, fixed-rate loan applications have jumped more than 30 percent in the same period.

“It’s encouraging to see that consumers have not been scared off by the ‘credit crunch’ and ‘mortgage meltdown’ talk, and are returning to secure, tried-and-true home financing,” Wachter said in the announcement.. “This trend emerged in the first half of 2007, and I expect it to continue as homebuyers become more informed about their mortgage options and lenders reign in risky products.”

But the credit crunch has scared off new home buyers, with new home sales falling 8.3 percent in August from July, the National Association of Home Builders reported today. The seasonally adjusted annual rate was 795,000 units.

The new home figures provide continued support for holding down rates.