|Refinance applications tumbled as fixed mortgage rates soared past seven percent this week. Freddie Mac reported that the average thirty-year fixed rate mortgage (FRM) rose twenty-seven basis points (BPS) from last week to 7.02 percent. While the 30-year average rose only 20 BPS in the North Central , that region of the country had the highest average at 7.07%. The Southeast is still below seven percent, at 6.99% -- the lowest region in the country.
Robert Van Order, Freddie Mac's chief economist, said "although we had confirmation this week that the US economy has been in a recession since March of this year, mortgage rates jumped. This is because sentiment that the recession will not be as long or as deep as usual is putting upward pressure on mortgage rates."
In its announcement of the results from its latest weekly survey of 125 thrifts, commercial banks and mortgage lending companies, Freddie said that the average fifteen year FRM rose 29 BPS from last week to 6.53%. Because of the greater spike in the 15-year rate, the difference between the thirty-year and the fifteen-year narrowed to 49 BPS, or just under 1/2 percent, from 51 BPS last week.
Three weeks of rising rates have continued to push down refinance activity. The Mortgage Bankers Association of America (MBA) reported that applications for refinances fell almost fifteen percent from the prior week. Just two weeks ago, MBA reported that refinance applications peaked out at a level nearly thirty percent higher than this week's reported levels.
Refinances may get a boost if Bankrate.com's "mortgage experts" are right. Bankrate.com said that nearly sixty percent of the more than 100 mortgage bankers, mortgage brokers and other industry experts it surveyed believe rates will fall more than 2 BPS over the next 35-45 days. Greg McBride, Bankrate.com's financial analyst, said releases due throughout the week could push rates lower. "The Fed's Beige Book, durable good orders, an estimate of Gross Domestic Product, and a Purchasing Manager's indicator may reinforce the notion of lingering economic weakness."
One bright spot in MBA's weekly survey, which covers approximately 40 percent of all U.S. retail residential mortgage originations, was purchase application activity; applications for purchase-money mortgages were 9.6% higher than last week. Also, this is the second week that purchase applications were higher. Freddie's Van Order said that one offset to the gloomy economy is an active and healthy housing industry. "As a matter of fact, new and existing home sales in October rebounded unexpectedly from the previous month," he added.