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| Rates jumped in response to inflation concerns and pushed application activity down.
Defying four consecutive weekly decreases, the average 30-year fixed-rate mortgage climbed to 6.37% from last week’s 6.30%, Freddie Mac said its latest survey of 125 mortgage-lending companies, thrifts and commercial banks showed. At this time a year ago, the average was 34 percentage points lower. More than two-thirds of the 100 mortgage brokers, bankers and other individuals surveyed by Bankrate.com this week see rates rising over the next 35 to 45 days, while 20 percent see no change and 10 percent see a decrease. Freddie, however, doesn’t see much change in the 30-year, as its October outlook has it averaging 6.4% this quarter and slightly higher at 6.5% until the second quarter 2007. The 15-year averaged 6.06%, rising 8 basis points from a week earlier, Freddie reported. The gauge for long-term mortgages, the 10-year Treasury note, yielded 4.77% late Thursday — 16 BPS higher than a week earlier. The averages for 5-year Treasury-indexed hybrid adjustable-rate mortgages and 1-year Treasury-indexed ARMs both surged 10 BPS from last week to 6.10% and 5.56%, respectively, Freddie added. Meanwhile, the index for 1-year ARMs, the 1-year T-Bill, rose 15 BPS over a week to 5.02% Wednesday, Federal Reserve data showed. “Renewed concern that inflation is still an issue put some upward pressure on bond yields, which generally translates into higher interest and mortgage rates,” said Frank Nothaft, Freddie Mac chief economist. “ARM rates especially felt the weight of increased inflation fears, narrowing the gap between ARMs and fixed-rate mortgage rates. Thus, ARMs may become less desirable.“ The Mortgage Bankers Association reported the share of ARM applications edged down from the prior week to below 27%, very near the 3-year low experienced a few weeks back. But Freddie expects the share to sink to 17% this quarter and remain there throughout next year even as the 1-year ARM average heads slightly lower than its current level — to 5.4% this quarter and 5.5% in the second quarter 2007. Overall mortgage application volume fell about 6 percent during the week ending Oct. 6, MBA added, as refinance requests took a 6% downturn and purchase money loan demand decreased 5%. The refinance share of mortgage activity reportedly slipped from the prior week to 46%. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com. e-mail: [email protected]
