Mortgage Market Breather

Unchanged from the prior week, the 30-year fixed-rate mortgage averaged 6.14%, according to Freddie Mac’s latest survey of 125 mortgage-lending companies, thrifts and commercial banks. A year ago, the average was 20 basis points higher.

The 15-year averaged 5.88%, inching up 2 BPS from a week ago, Freddie said.

Near midday, the 10-year Treasury note yielded 4.54%, slightly worse than 4.50% last Thursday afternoon.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage average reportedly remained at 5.90% this week.

The most notable change — falling 5 BPS in the last seven days to 5.42% — occurred in the 1-year Treasury-indexed ARM average, Freddie said. The 1-year Treasury bill yield, at 4.90% Tuesday, slipped 2 BPS from one week earlier, Federal Reserve data showed.

“The latest economic news gave no reason for change,” said Frank Nothaft, Freddie chief economist, in an announcement. “The economy added 97,000 jobs in February, in line with consensus expectations, while the unemployment rate dipped to 4.5 percent. But the promising employment situation did not materialize at the cash registers, with retail sales only growing by 0.1 percent in February, falling short of the 0.3 percent gain that had been predicted.

“Over the course of next week, February’s inflation measures at the wholesale and retail levels will be published and could serve as the driving force behind further rate movement.”

During the next month and a half or so, rates will fall, according to 62 of the 100 mortgage bankers, brokers and individuals surveyed by Bankrate.com this week. Of the remaining panelists, 23 said rates will remain relatively unchanged over that period and 15 forecast an upturn.

The Mortgage Bankers Association said it expects the 30-year to average 6.2% this quarter, rise by 20 BPS in the second quarter and increase by 10 BPS in each of the following two quarters to end the year at 6.6%. Freddie, on the other hand, sees the 30-year ending the year at 6.4%.

For now, lower rates aided mortgage originators in completing 3 percent more applications than in the previous week, as refinance requests rose by almost 4 percent and purchase money loan demand grew by 2 percent, according to the Mortgage Bankers Association’s survey for the week ending March 9.

The refinance share of mortgage activity remained at 46%, MBA said, and the ARM share edged up to 22%.

“Given the drop in mortgage rates in the fourth quarter of 2006 and early 2007, refi originations will be strong through the first half of 2007,” MBA said in an announcement. “Furthermore, as a significant share of loans with adjustable rates will face their first reset in 2007, we expect that a portion of these loans will be refinanced into either fixed-rate mortgages or into other adjustable-rate mortgages with an initially lower rate, providing strong support for refi activity this year.”

However, MBA expects refinance originations to fall 11 percent from last year to $986 billion and for purchase originations to drop 7 percent to $1.29 trillion this year.