Adjustable rate mortgages accounted for less than 29% of overall applications, according to the Mortgage Bankers Associations’ Weekly Mortgage Applications Survey for the week ending December 30. The share was down sharply from nearly 33% reported the prior week.

While the one-year Treasury-indexed ARM was up just 0.01% to 5.16% this week, according to Freddie Mac’s latest survey of 125 thrifts, commercial banks and mortgage bankers, it is more than one percent higher than a year ago. The index for the one-year, the 1-year Treasury, stood at 4.35% Wednesday, virtually unchanged from last week, according to the Federal Reserve.

Like the one-year, the average five-year hybrid adjustable rate mortgage was up one BPS to 5.78%, and was 75 BPS worse than last year at this time, according to Freddie’s survey.

Freddie’s annual ARM survey released today indicated the share of adjustable rate originations has remained near a decade-high level despite a flattening yield curve.

Freddie’s Nothaft said ARM share will fall to 25% by the end of this year.

The average 30-year fixed rate mortgage nudged down one basis point from last week to 6.21%, Freddie reported. The 30-year is, however, about 44 basis points worse than a year ago.

“Financial markets paused this week, trying to decipher the December minutes of the Federal Reserve’s monetary policy committee, which seemed to hint that the Fed might slow the pace of rate hikes in 2006,” leaving rates little changed this week, said Freddie’s Chief Economist Frank Nothaft in the survey.

At 5.76%, the average 15-year fixed rate mortgage didn’t budge from the prior week but was 55 BPS higher than last year, Freddie reported.

The 10-year Treasury, which fixed mortgage rates tend to move with, yielded 4.35% at today’s market close, about four BPS better than last week.

In contrast to recently rising rates, 80% of the mortgage bankers, mortgage brokers and other industry “experts” surveyed by Bankrate.com expect rates to fall. The rest see rates increasing.

Overall loan applications edged down about two percent, MBA said. An eight percent jump in refinance applications — which accounted for 43% of all applications, was more offset by a 3% decline in purchase applications.

Sam Garcia has been in mortgage lending since 1980, and is publisher of MortgageDaily.com, MortgageChronicle.com, FraudBlogger.com and CloserBlog.com.

email: SamGarcia@MortgageDaily.com