30-Year Improves Again

The average 30-year fixed-rate mortgage edged down three basis points from a week ago to 6.52%, Freddie Mac said in its most recent survey of 125 mortgage-lending thrifts, companies and commercial banks. A year ago, the average was at 5.80%.

“Long term rates continue to relax as economic reports support a picture of a weakening housing sector and a slower growing economy,” said Freddie Chief Economist Frank Nothaft in an announcement.

The 10-year Treasury note yield, currently at 4.87% and five BPS below last Thursday, is around levels seen in the spring due to data yesterday that indicated tamed inflation pressures.

“This week’s news that July housing starts fell 2.5 percent added conviction to Fed Fund futures traders who are currently pricing contracts to suggest the chances of another rate increase from the central bank this year are about fifty-fifty.”

Freddie indicated this has resulted in 30-year fixed-rate mortgages decreasing for the fourth straight week, by about 30 percentage points within that time, to the lowest point since mid-April.

The Mortgage Bankers Association’s latest outlook suggests the 30-year will linger around its current level for the quarter, averaging 6.6%, go up to 6.7% next quarter and up to 6.8% until the third quarter 2007.

Seventy-five of the 100 mortgage bankers, brokers and industry individuals surveyed by Bankrate.com believe that over the next 35 to 45 days mortgage rates will remain relatively unchanged. Another 13 percent think rates will rise, and the rest foresee a downturn.

The 15-year average was reportedly unchanged from last week at 6.20%.

Slipping three BPS within the past seven days, the average 5-year Treasury-indexed hybrid adjustable-rate mortgage came in at 6.18%, Freddie reported.

The 1-year Treasury-indexed ARM average was 5.65%, or four BPS lower than last week. The 1-year T-bill on Tuesday was at 5.11%, three BPS above the level a week earlier, the Fed said.

Loan originators completed slightly more 1003s than in the prior week thanks to a 5 percent increase in refinance requests, which offset a 1 percent decrease in purchase money application activity, MBA said.

Refinance applications reportedly continued to gain ground, with the share edging up from the prior week to 40%, while the ARM share slipped to 27% — the lowest since February 2004.

ARM rate decreases have not been as large as those seen in long-term mortgage rates, “all of which could help persuade homeowners with ARMs on the verge of resetting to make the decision to lock into a fixed-rate mortgage now rather than take a chance of a higher rate on the adjustment date,” Freddie said.