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| Signs of inflation put pressure on mortgage rates but didn’t hamper traffic at mortgage shops, although the gap between short-term and long-term mortgage rates fell to the narrowest margin in four years.
Ticking up one basis point from a week ago, the 30-year fixed-rate mortgage average came in at 6.37%, Freddie Mac’s latest Primary Mortgage Market Survey showed. At this time last year, the average was 5.74%. The panel of 100 mortgage bankers, brokers and individuals surveyed by Bankrate.com this week was evenly split between those who believed rates would rise over the next 35 to 45 days and those who predicted they’d stay within plus or minus two BPS of their current levels. Freddie’s updated outlook, however, does not anticipate much change in the 30-year, as it has it averaging 6.3% throughout the first half 2006. Freddie said the average for the 15-year also edged up by one BPS during the past week to 5.90%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly averaged 5.86%, increasing 5 BPS within the past seven days. The largest upturn was reported in the 1-year Treasury-indexed adjustable-rate mortgage — up 8 BPS to an average 5.20% this week. At 4.34%, the 1-year Treasury bill itself was unchanged during the week, the Federal Reserve said Thursday. The recent release of inflation indicators, the Consumer Price Index and Producer Price Index, “brought down long term bond yields, flattening out the yield curve,” commented Freddie chief economist Frank Nothaft in a statement. The 10-year Treasury note yielded 4.46% with a price of 100.25 at Thursday’s close, way better than 4.56% and 97.56 a week earlier. “Consequently, the [117-BPS] difference between the 30-year fixed-rate mortgage and the one-year ARM rate is the narrowest it has been since November of 200,” Nothaft added. “This will make the one-year ARM product much less attractive to borrowers.” For the moment being, the Mortgage Bankers Association reported that ARMs comprise one-third of applications — the highest share since mid-2005. For the year, Freddie expects the ARM share to average 31% the drop to 28% in 2006. The 5% decline in refinance requests during the Veteran’s Day-shortened week offset an increase of nearly 3% in purchase money loan applications, leaving overall application volume unchanged from the previous week, according to MBAs latest application survey of mortgage-lending companies, banks and thrifts. The refinance share of mortgage activity reportedly edged down from the previous week to 40%. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com. e-mail: [email protected]
