ARMs Lead Jump in Rates

The average for the 30-year fixed rate mortgage jumped 16 basis points within the past week to 6.31% — the highest its been at since mid-June 2004, according to Freddie Mac’s latest survey of 125 mortgage lending companies, thrifts and commercial banks.

“Based on preliminary GDP figures for the third quarter, the economy is expanding faster than had been expected,” commented Frank Nothaft, Freddie chief economist, in a statement. “Originally, the markets had lowered economic expectations for the third quarter because of the impact of the hurricanes. So the news of an economy growing at such a strong pace gave financial markets a jolt and added to the impetus that caused mortgage rates to rise again this week.”

Three-quarters of the 100 mortgage “experts” surveyed by Bankrate.com this week expect rates to rise over the next 35 to 45 days, while the rest expect them to fall.

The Mortgage Bankers Association believes the 30-year average will hover the current level for sometime before rising to 6.6% in the second quarter 2006, according to its updated long-term forecast.

The 15-year reportedly averaged 5.85% — 16 BPS above last week.

The 10-year Treasury note yielded 4.65% with a price of 96.84 at Thursday’s close, compared to 4.56% and 97.53 a week earlier.

Up 13 BPS from a week earlier, Freddie said the 5-year Treasury-indexed adjustable-rate mortgage average came in at 5.76%.

The 1-year Treasury -indexed ARM soared 18 BPS from a week ago to 5.09% — which Freddie said is the highest since March 29, 2002. The 1-year T-bill itself reportedly rose only five BPS within a week to 4.31% Tuesday. The ARM share of applications continued at nearly 30%, MBA reported.

The volume of 1003s slipped 5% from the prior week due to a 6% decline in purchase money applications and 3% decrease in refinance requests, according to MBAs Weekly Mortgage Applications Survey for the week ending Oct. 28.

Despite lessened refinance application activity, MBA said the refinance share edged up from the previous week to 44%.

On an unadjusted basis, the overall measure of applications is down 15% from that reported a year ago. At that time, the spread between the 30-year and 15-year was reportedly 0.16% wider than it currently is and between the 30-year and 1-year ARM was 0.48% broader.