Fixed Rates Rise, ARMs Off

The average 30-year fixed-rate mortgage, at 5.81%, jumped 9 basis points from a week ago and is down 8 BPS from a year ago, according to Freddie Mac’s latest survey of 125 thrifts, commercial banks, and mortgage-lending companies.

The 15-year came in at 5.23%, up 8 BPS for the week.

“Recent economic indicators came out better than had been anticipated, buoying financial markets this week, and reinvigorating confidence in financial markets that the last three months of the year will post a very positive rate of economic growth,” Freddie chief economist Frank Nothaft said in a written statement. “Of course, with the signs of strong growth come fears of inflation and that tends to push up long-term mortgage rates.”

The 10-year Treasury-note yield closed at 4.41% Thursday with a price of 98 23/32.

The last labor report indicated a strengthening economy, but November’s results, released this morning, were disappointing. Just before the report was released, traders surveyed by Dow Jones Newswires and CNBC had expected a 220,000 increase in nonfarm payrolls; the Labor Department reported nonfarm payrolls grew by just 112,000 jobs last month.

In its November outlook, the Mortgage Bankers Association has the 30-year averaging 5.7% this quarter — 20 BPS below its prediction a month prior — and hanging below 6% until the second quarter next year.

None of Bankrate.com’s surveyed panel of 100 mortgage bankers, brokers and other industry participants, believe rates will descend in the next month and a half, while 84% predict rates will keep increasing.

The 1-year Treasury-indexed adjustable-rate mortgage averaged 4.19%, down 8 BPS from last week, Freddie said.

Despite the drop in the 1-year ARM average, MBA said the ARM share of total applications edged down a little below one-third. However, MBAs ARM share data is about a week older than Freddie’s data collected for the average adjustable rate.

The Thanksgiving holiday aided the 6% slowdown in overall mortgage activity, bringing the Market Composite Index down from the previous week to 673.3, MBA said. While requests for purchase money were almost unchanged, refinance application activity fell 12% and caused the refinance share to edge down to 46%.

Jay Brinkman, MBAs vice president of research and economics, said one of the notable trends the application survey showed, is that “the average seasonally adjusted Government Purchase Index for November is down 43.8 percent compared to the same month last year while the average seasonally adjusted Purchase Index for conventional loans has increased 20.9 percent on a year over year basis. This represents a major drop in FHA’s share of the purchase market during 2004.”