While the long Thanksgiving weekend slowed mortgage application activity, rates rose slightly, and speculation of a better economy will keep them on an incline, analysts say.
For the week ending Nov. 28, the mortgage application activity index dropped 11.7% from the previous week to 685.1, said the Mortgage Bankers Association of America in its Weekly Mortgage Applications Survey. A year ago, the index stood at 939.0.
The MBA reported the purchase money application index decreased by 3.9% to 441.8, but the index for refinance applications plunged 19.6% to 2100.0. Refinances accounted for half the share of total application activity, down 3.3% from the previous week.
The ARM share of activity nudged down to 26.6%, said the MBA. Freddie Mac reported that one-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 3.77%. The latest cost of funds index, which competes with the one-year Treasury for ARM loans, came in at 1.909% in October, falling 1 basis point (BPS) from September, reported the Federal Home Loan Bank of San Francisco.
According to Freddie’s Primary Mortgage Market Survey for the week ending Dec. 5, the 30-year fixed-rate mortgage averaged 6.02%, up 13 BPS from the previous week. A year ago, the average was higher at 6.19%.
Up 14 BPS, Freddie averaged the 15-year at 5.36%.
“Financial markets are speculating about what the Federal Reserve Board will say when it meets next week,” said chief economist Frank Nothaft in Freddie’s announcement. “And it looks like the market is taking bets that the Fed will soften its language and raise rates sooner rather than later. As a result, bond yields drifted higher and with them went mortgage rates.“
At Thursday’s close, the 10-year Treasury note yield stood at 4.36% and the price at 99 2/32. At the end of last week, the yield was 4.25%.
According to Bankrate.com, rates rose because of anticipated consumer spending for the holidays, but sales reports from the after-Thanksgiving weekend were not as great as some retailers had wished.
“The economy is feeling a bit jiggy with the good employment numbers and early retail reports recently,” said a mortgage analyst at Bankrate.com. “Rates will most likely start to anticipate better days and rise gradually in the coming months. Do your holiday shopping and rate shopping now before the good deals are gone.”
This week, 45% of site’s panel of mortgage industry experts predicted rates will go up over the next 30 to 45 days. Meanwhile, 37% of the panel voted rates will remain unchanged and 18% forecasted they will decrease.