Rates, 1003s Down

The 30-year fixed-rate mortgage averaged 6.30%, nudging down 2 basis points from last week but 62 BPS above the level a year ago, according to the latest Freddie Mac Primary Mortgage Market Survey results announced today.

Freddie’s December forecast projects the 30-year this quarter will average its current level, rise to 6.5% mid-2006, end the year at 6.6% and reach 6.7% until 2007. The Mortgage Bankers Association sees the current average maintaining through the next quarter but moving to 6.7% by year-end 2006.

In line with such predictions, half the panel of 100 mortgage “experts” Bankrate.com surveyed this week expect rates to remain relatively unchanged over the next 30 to 45 days. The panel, which has yielded the same survey results every week so far during December, were evenly divided among those who expect them to fall and those who think they’ll rise.

Freddie said the average for the 15-year slipped 2 PBS this week to 5.85%.

The gauge for long-term mortgage rates, the 10-year Treasury note, yielded 4.46% with a price of 100.25 at the market’s close today, barely changed from a week earlier.

The average for the 5-year Treasury-indexed hybrid adjustable-rate mortgage came in at 5.78%, edging down a basis point from a week ago.

The 1-year Treasury-indexed ARM average reportedly also came in a basis point lower at 5.15%, resembling a dip in the 1-year T-bill yield to 4.32%, as reported by the Fed for Wednesday, down from 4.36% last week.

“Earlier in the week, interest rates were a bit higher, as financial markets were a little anxious about what language the Federal Reserve … would use in its statement this month,” Freddie Chief Economist Frank Nothaft said in the announcement.

On Tuesday, the Fed announced another 25-BPS increase in the federal funds target to 4.25%, noting that economic activity expansion “appears solid” and that “core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained.”

“When the Fed signaled that it’s interest rate tightening may be coming to an end soon, the financial market breathed a sigh of relief, and rates eased somewhat,” Nothaft added.

Overall application volume fell about 6% during the week ending Dec. 9 as refinance requests dropped 10% from the previous week and purchase money loan requests fell 4%, the Mortgage Bankers Association’s latest application survey reportedly showed. A year ago, the reported 689.0 application volume was higher than the current 619.3.

The share of refinance applications slipped from the prior week to 40%, MBA said, while the ARM share of activity edged up to 34%.