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Business Strengthens as Rates to Plummet

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Prospective borrowers ignored a slight bump in mortgage rates this week and pushed new loan activity higher. But mortgage rates could be nearly 20 basis points better in next week’s report based on Treasury market activity. Interest in adjustable-rate mortgages surged, and government loan activity was stronger.

The U.S. Mortgage Market Index for the week ended July 29 from Mortech Inc. and came in at 230, up about 10 percent from last Friday. But the index has fallen considerably form 310 in the week ended July 28, 2010.

The biggest boost came from ARM inquiries, which jumped 19 percent from a week earlier. ARM share was 11.01 percent this week versus 9.89 percent seven days prior.

Also exhibiting a healthy gain were pricing inquiries for mortgages insured by the Federal Housing Administration, which jumped 12 percent. FHA share fell, however, to 11.96 percent from 12.12 percent in the previous report.

Conventional business was up 10 percent this week.

Purchase activity was also 10 percent higher, as were refinances. Refinance share was mostly unchanged from a week earlier at 52 percent. The share has softened from 59 percent a year earlier. Refinance share reflected a 37 percent rate-term share and cashout share of 15 percent.

The uptick in pricing inquiries came despite a slight rise in mortgage rates. The conventional 30-year fixed-rate mortgage rose to 4.708 percent from 4.699 percent. The 30 year was 4.485 percent at this point in 2010.

However, mortgage rates are likely to be roughly 18 BPS better by next Friday’s report based on the 10-year Treasury note yield — which plummeted to 2.82 percent today from 2.99 percent a week ago based on data released from the Department of the Treasury. However, the final outcome of Congress’ deliberation over the debt ceiling leaves this measure volatile.

The jumbo-conforming spread, meanwhile, deteriorated to 43 basis points from 41 BPS last week. But the spread sits well below 94 BPS in the same week last year.

The spread between 15-year and 30-year conforming fixed-rate mortgages was unchanged from last week at 88 BPS.

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