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| Last week’s news of a significant job growth spelled bad news for the mortgage market this week — rates shot up to the highest level in four months and applications slipped for the third week in a row. However, the shakeup is tempered by rates that are still expected to average well below six percent this year, according to one industry economist.
The 30-year fixed-rate mortgage averaged 5.79% this week, up a whopping 27 basis points (BPS) from last week, according to Freddie Mac’s latest survey of 125 lending thrifts. The figure nears the average during this time last year, which was 5.85%. The 15-year jumped 28 BPS to 5.12%, the government-sponsored enterprise reported. Breaking further away from its recent 20-year low, Freddie said the 1-year Treasury adjustable-rate mortgage (ARM) average climbed 19 BPS to 3.65%. Meanwhile, the share of ARMs increased to 28.8% of total applications from 27.5% the previous week, the Mortgage Bankers Association of America (MBA) reported. The 10-year Treasury note traded at a price of 98 16/32 and 4.18% yield late Thursday morning. Last week, the note closed at a 3.95% yield. “Mortgage rates again followed the bond market, rising significantly from last week to this week, and spurring speculation that the Federal Reserve Board will raise rates sooner rather than later,” said Freddie’s deputy chief economist, Amy Cutts, who noted that the bond market reacted to the “welcome news” in last Friday’s employment report. Payroll jobs increased by 308,000, according to the Bureau of Labor Statistics. “It should also be noted that long-term rates are not expected to rise precipitously,” she added. In its April economic forecast, Freddie said the Federal Reserve Board will keep the Federal Funds target at 1% until at least the summer and perhaps through the end of 2004, adding that the 30-year will average 5.6% for the year. At Bankrate.com, the majority, or 55%, of the surveyed panel of mortgage industry experts predicted that rates are likely to increase within the next month and a half, while 27% voted rates would remain unchanged and 18% voted for a downturn. Mortgage application activity slipped again — the Market Composite Index dipped 7.2% from the previous week to 1012.9, according to the MBA’s latest Weekly Mortgage Applications Survey. At this time last year, the measure of purchase and refinance applications stood at 1246.1. The overall dip in applications was influenced by the drop in the Refinance Index — it decreased by 15.0% from the previous week to 4126.7, MBA reported. Accordingly, the refinance share of mortgage activity decreased to 57.1% of total applications from 62.8%. Meanwhile, MBA said the Purchase Index increased by 7.6% to 477.5. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.
email:Â s3celeste@aol.com
