30-year Below 6% Until Late 2005

The 30-year fixed-rate mortgage averaged 5.74% and the 15-year 5.15%, respectively edging down two and one basis points within the past week, according to Freddie Mac’s latest Primary Mortgage Market Survey.

The 1-year Treasury-indexed adjustable-rate mortgage average reportedly nudged up one basis point from last week to 4.17%.

In a written statement, Freddie’s chief economist Frank Nothaft said “most economic indicators are pointing to sustainable growth in the economy and this should lead to further job creation,” but he saw “no dramatic rise in rates on the horizon.”

His comment followed Wednesday’s announcement by the Labor Department that the Consumer Price Index increased 0.6% in October, compared to a 0.2% rise in September. Costlier energy and food were the main contributors to reportedly the biggest increase in five months in the government’s most closely watched inflation gauge, yet interest rates did not rise as they usually would with such news.

Fannie Mae seemed to agree with Nothaft. The Washington, D.C.-based secondary lender said in its November forecast that it expects the 30-year average to stay near its current level this quarter, rise to 5.84% next quarter and stay below 6% until the third quarter 2005. As far as the 1-year ARM, the largest change seen in the forecast from now through next year will be the 20 BPS jump between the first and second quarter — 4.17% to 4.37%, respectively.

The majority of surveyed mortgage brokers, bankers and other individuals surveyed at Bankrate.com believe rates will rise over in the remainder of the quarter; 57% voted for an upturn and the rest predicted rates will remain about the same, give or take two BPS.

Possible sustained low rates may fuel mortgage application activity, which upticked 4% from the previous week — as represented by the reported rise in the Mortgage Bankers Association’s Market Composite Index to 758.3. MBAs survey of mortgage bankers, commercial banks and thrifts reflected slower application activity a year ago — when long-term rates were about a quarter percent higher and the ARM was 40 BPS lower — with the Composite Index then at 663.2.

The week-to-week increase in overall applications was fueled by an 11% jump in refinance requests, the trade group said, with purchase applications mostly unchanged.

Accordingly, the refinance share of mortgage applications edged up slightly from last week to nearly half.

MBA said the ARM share nudged down from the previous week to 34%. A year ago, despite that the average ARM was much lower, the ARM share was only at 27.5%.

The 10-year Treasury-note yield was up a whopping 9 BPS early Friday, at 4.20%. The price was off $0.78125 to 100 11/32.