Rates Headed Higher

The average 30-year fixed-rate mortgage was 6.63%, inching up only 1 basis point from last Thursday, when a downturn had been reported, according to Freddie Mac’s survey of 125 thrifts, commercial banks and mortgage companies. A year ago, the average was exactly 1% lower than the current level.

“Mixed economic indicators are causing some volatility in financial markets,” Freddie said in the announcement. “This invariably leads to the fluctuations in mortgage rates like what we have seen recently.

“Still, there has been no drastic movement in mortgage rates and we see nothing on the horizon that would bring about any extreme rise or fall in rates going forward.”

Freddie’s June mortgage finance forecast indicates the 30-year will average 6.7% throughout the year’s remainder and rise to 6.8% until the second quarter 2007. The Mortgage Bankers Association’s latest outlook, however, has it reaching the latter level next quarter.

A majority, or 63%, of the 100 mortgage “expert” panelists surveyed by Bankrate.com this week see rates rising over the next 30 to 45 days, compared to about a quarter who believe rates will remain relatively unchanged and 13% who foresee a fall.

Up 2 BPS from last week, Freddie said the 15-year averaged 6.25%.

The inverted yield curve is back, as the 10-year Treasury note yield closed at 5.09%, below the 2-year note’s 5.13% yield.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly averaged 6.23%, slightly above last week’s level of 6.20%.

Freddie said the average 1-year Treasury-indexed ARM rose 3 BPS within a week to 5.66%. The 1-year T-bill itself, at 5.15% Wednesday, soared 10 BPS from a week earlier, the Federal Reserve reported.

Refinance requests jumped 11% during the week ending June 9 and purchase money loan application activity improved 5%, pushing the overall volume of mortgage applications 7% above the prior week’s level, MBA reported.

The refinance share of total applications neared 36%, almost 2% higher than in the previous week, while the ARM share had a similar improvement to make up 31% of 1003s, according to the trade group.