Mortgage Market Closes Out 2003

The 30-year fixed-rate mortgage came in at 5.85%, up 4 basis points (BPS) from last week, said Freddie Mac in its latest Primary Mortgage Market Survey. A year ago, the average was at the same level.

Up 2 BPS from last week, Freddie said the 15-year fixed rate mortgage averaged 5.15%.

In Bankrate.com’s latest weekly survey of mortgage industry experts’ rate predictions, 57% of the panelists voted rates would remain unchanged (plus or minus 2 BPS) over the next 30 to 45 days, 29% said they would go down, and 14% voted rates were headed upward.

Bankrate.com’s financial analyst Greg McBride, who voted in the “unchanged” category, said that rates will hover near the 6% mark through January. The low inflation outlook, despite the robust pace of economic growth — typically followed closely by increased price levels, gives the “Fed plenty of latitude to keep interest rates low and removes any immediate pressure toward higher rates.”

Swerving from the direction of long-term rates, 1-year Treasury-indexed adjustable-rate mortgages (ARMs) edged down 1 BPS to 3.72%, according to Freddie. This marks the second consecutive week it has declined after it remained unchanged for a month at 3.77%.

“The yield curve, at its steepest annual level since 1992, is indicative of a favorable ARM market,” said Freddie’s deputy chief economist, Amy Crews Cutts, in the announcement.

ARMs accounted a little under a third — 30.4% — of the applications in the Mortgage Bankers Association of America’s (MBAs) weekly survey, an incline from 27.8% the previous week. According to Cutts, the ARM share has doubled from January to December of this year.

“With the Federal Reserve on hold until at least June, the yield curve should continue to be steep and once we begin to see signs of inflation, it may well become ever steeper, at least until the Fed raises short-term rates,” added Cutts. “Until then, the savvy homebuyer or refinancer has the option of lowering monthly mortgage payments by choosing one of the many ARM products available today.“

The 10-year Treasury note yield closed the year out at 4.25%, while a week ago, it was reported at 4.15%. The price was 99 31/32, compared to the previous week at 100 23/32

For the week ending Dec. 26, the Market Composite Index, which is a measure of mortgage loan applications for purchases and refinancings, decreased 9.0% from the previous week to 574.1, MBA said. The group’s Weekly Mortgage Applications Survey showed that, at this time last year, application activity was higher at 950.9.

All application type indexes fell, said the MBA. The Government Index had the largest percentage drop — 17.3% from the previous week to 201.7, followed by the Refinance Index (down 13.8%), Conventional Index (7.6%) and the Purchase Index (5.2%). The refinance share of total applications was 49.3%, edging down about 2% from the prior week.