Economists' forecasts have the 30-year fixed rate reaching 7% and the 1-year ARM reaching 5.5% by 2007.
During the past seven days, the 30-year fixed-rate mortgage averaged 5.66%, nudging down one basis point, according to Freddie Mac's latest Primary Mortgage Market Survey of 125 thrifts, commercial banks and mortgage-lending companies. The 30-year is two BPS below its level a year ago.
The Mortgage Bankers Association's latest forecast has the 30-year averaging 6.4%, 6.6% and 7.0%, at the end of 2005, 2006 and 2007, respectively. Last week, several industry economists predicted the 30-year could end this year anywhere from 6.25% to 6.75%.
The 15-year also edged down one BPS from last week to 5.14%, Freddie said.
The five-year Treasury-indexed hybrid ARM average dropped three BPS to 5.02%.
For the second week in a row, the 1-year Treasury-indexed ARM was up -- this time seven BPS to 4.18%. The MBA predicted the rate for this mortgage will end 2005, 2006 and 2007 at 4.7%, 5.1% and 5.5%, respectively.
"Until the market gets a better read of how the economy performed at the end of last year and how the Fed interprets that information, interest rates will likely remain calm," said Freddie chief economist Frank Nothaft in a written statement. "And it should get that read when fourth quarter Gross Domestic Product is released [today].
"Further, the Fed will release its policy statement next week, giving financial markets a better sense of what future actions the Fed may be contemplating," Nothaft added. "All of this will help determine where mortgage rates will be in the near future."
Half of the 100 mortgage "experts" Bankrate.com surveyed this week believe long-term will stay the same, while one-third of them believes they may even fall and only 17% foresaw a rise.
Near midday, the 1-year Treasury-note was trading at 100.88 with a yield of 4.14%.
For the week ending Jan. 21, mortgage loan application volume decreased nearly 4% from the prior week, bringing the Market Composite Index to 658.1, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. Last year at this time, when the 30-year fixed was about the same as it currently is, the index was at 868.9.
MBAs survey reflected a 2% decrease in purchase money requests and a 6% decline in refinancing application activity.
The refinance share of mortgage applications reportedly edged down from the previous week to about 47%, and ARM share slipped below 32%.