Mortgage Market Softens

The 30-year fixed-rate mortgage averaged 6.13%, just 1 basis point above last week, according to Freddie Mac’s latest Primary Mortgage Market Survey. A year earlier the average was at 6.26%.

“A quiet week for financial markets translated into a quiet week for mortgage rates as well,” said Freddie Chief Economist Frank Nothaft in an announcement. “This isn’t much of a surprise, as traditionally the December holiday season tends to be rather slow for housing.”

While Freddie’s latest forecast has the 30-year averaging 6.3% this quarter and ending next year at 6.4%, the Mortgage Bankers Association updated outlook has the average rising to 6.3% until the second quarter next year and climbing to 6.5% in the third quarter to end 2007 at that level.

Of the 100 mortgage “experts” surveyed by Bankrate.com this week, 43 believe mortgage rates will fall over the next 30 to 45 days, 29 forecast an upturn and 28 believe rates will remain relatively unchanged.

The 15-year averaged 5.89%, edging up 3 BPS over the past seven days, Freddie said.

The 10-year Treasury note yielded 4.55% Thursday afternoon, compared to 4.58% a week earlier.

The average 5-year Treasury-indexed hybrid adjustable-rate mortgages was reportedly 5.96%, up 4 BPS from a week ago.

Down 1 BPS from last week to 5.44% was the 1-year Treasury-indexed ARMs average, Freddie reported. The 1-year Treasury bill yield, at 4.96%, Tuesday, was 5 BPS above the level a week earlier, Federal Reserve data showed.

As markets hushed, refinancing activity took a 15% downturn over the week ending Dec. 15, and purchase money loan demand dropped 6%, leading to a 10% decrease in overall application volume, MBA reported on Wednesday.

The refinance share of mortgage applications slipped from the previous week to 51%, MBA added, and the ARM share ticked down to below 24% — the lowest level since October 2003.