Rates Dip

The prior week’s small gain in overall mortgage loan applications was reversed, according to the most recent Weekly Mortgage Applications Survey. The survey, from the Mortgage Bankers Association of America (MBA), showed the Market Composite Index decreased by 0.5% to 649.6. Last year at the same time the index stood at 911.0.

The recent survey showed a 5.7% decrease in the Purchase Index and a 4.9% increase to 2311.8 in the Refinance Index. A week ago, the MBA reported applications for purchase mortgages went up and those for refinancings were down. Last year at this time, the Refinance Index stood at 4240.4. Furthermore, the share of refinance applications increased from 50.5% the previous week to 53.3%.

The share of adjustable-rate mortgage (ARM) applications increased slightly from 26.2% the previous week to 26.5%, said MBA. Meanwhile, the average for one-year Treasury-indexed ARMs continued to decline, down slightly 2 basis points (BPS) to 3.74%, according to Freddie Mac.

“The ARM share of applications is at its highest point in over two and a half years,” said MBA survey manager Michael Cevarr in an announcement. “With little expectation of an increase in short-term rates in the near term, borrowers are reacting to the continued large spread between adjustable and fixed rates.”

After stalling at 6.05% for two consecutive weeks, the average for the 30-year fixed-rate mortgage lowered to 5.94%, according to Freddie’s most recent Primary Mortgage Market Survey. At the same time last year it averaged 6.13%.

Freddie said the average for the 15-year fell 13 BPS from the prior week to 5.26%.

The 10-year Treasury note closed Friday at 4.29%, down 2 BPS from that reported last week. The price rose 5/32 from last week to 99 20/32.

“Gross Domestic Product numbers surprised everyone today, posting a much larger-than-expected increase and confirming the notion that the economy has finally turned the corner,” said Freddie’s chief economist Frank Nothaft in an announcement. “Worry about disinflation should now be tempered somewhat, but fear of inflation is still unwarranted. And that should keep mortgage rates from rising too quickly or steeply anytime in the near future.”

The GDP increased at annual rate of 7.2% in the third quarter over the 6% that had been expected, according to published reports. This is the highest surge in nearly 20 years.

Not much direction was given by Bankrate.com. A financial analyst for the website said, “the upward influence of good economic data is being offset by Fed assurances of continued low rates. As a result, rates are fluctuating with no clear direction.”

Accordingly, there were split predictions in Bankrate.com’s mortgage industry expert panel as 31% foresaw an upturn in rates, the same percentage forecasted a downturn, and 38% said rates would remain unchanged.