Rate Watchers Eye Inflation

The 30-year fixed-rate mortgage averaged 5.74%, slipping three basis points from last week, according to Freddie Mac’s latest survey of 125 thrifts, commercial banks and mortgage-lending companies. At this time last year, it averaged 5.66%.

“Although we expect mortgage rates to end the year bit higher [than 6 percent], they still provide a historic value to borrowers considering how over the past thirty years fixed rate mortgages have averaged about 9.5 percent,” said Freddie’s deputy chief economist Amy Crews Cutts in a written statement.

In its January forecast, Freddie said it expects the 30-year to average 6.0% next quarter, which is 10 BPS below its forecast last month.

“One wrinkle in our forecast would be the emergence of unexpected inflation,” Cutts added. “At the end of this week and next, new inflation indicators will be released for the month of December. As it stands now, the market expects these releases to be tame, if not, mortgage rates will rise more quickly in response.”

Three-quarters of Bankrate.com’s surveyed panel of 100 industry bankers, brokers and individuals believed rates will rise in the next 45 days, and the rest thought they’d stay about the same.

The 15-year average reportedly edged down two BPS within the past seven days to 5.19%.

The Five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.05%, nudging up two BPS, Freddie said.

Unchanged from last week, the 1-year Treasury-indexed ARM average was reported at 4.10%. The ARM share of total applications was virtually unchanged at 33%, according to the Mortgage Bankers Association’s applications survey for the week ending Jan. 7.

Overall new mortgage applications fell 3.0%, with MBAs Market Composite Index reported at 587.8. A 6% decline in purchase money requests offset the 1% uptick in refinance application activity. The refinance share of applications edged up from the previous week to 49.0%.

The 10-year Treasury started off Friday at 100.22, with a yield of 4.22%.