Rates, Apps Worsen

The 30-year fixed-rate mortgage averaged 6.23%, jumping 11 basis points from last week, according to Freddie Mac’s latest survey of 125 mortgage-lending companies, thrifts and commercial banks. At this time last year, the average was 60 BPS lower.

The 5.81% reported average for the 15-year was also an 11 BPS increase from a week ago.

The gauge for long-term mortgage rates, the 10-year Treasury note, yielded 4.56% with a price of 99.50 at the close of trading today. The yield was only 3 BPS higher than that reported last Thursday by the Federal Reserve.

“Declines in worker productivity coupled with accelerating labor costs increase the threat of inflation down the road,” Freddie Chief Economist Frank Nothaft said in an announcement. “Inflationary pressure generated by these two factors pushes long-term mortgage rates upward, which is why we have seen rates rise these last two weeks.“

The Federal Open Market Committee rose the target for the federal funds rate Tuesday by 25 BPS to 4.5%, adding that “some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance.”

“Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained,” but “possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures,” the Fed said.

At 5.87%, the average 5-year Treasury-indexed hybrid adjustable-rate mortgage was unchanged from a week earlier, Freddie said.

The highest weekly increase — 13 BPS to 5.33% — reportedly occurred with the average 1-year Treasury-indexed ARM. The Federal Reserve reported the 1-year T-bill itself was 4.60% Wednesday, about nine BPS higher that reported last week.

Nothaft expects that mortgage “rates will surely fluctuate in the weeks and months ahead, but the trend now is for higher rates over the long run.“

Eighty-seven of the 100 mortgage “experts” surveyed by Bankrate.com this week believe rates will keep heading upward over the next 35 to 45 days and the rest expect them to remain about the same.

There were 5% fewer mortgage hunters in the market during the seven days ended Jan. 27 than the prior week, the Mortgage Bankers Association said Wednesday. The decline reflected an 8% downturn in purchase applications and a 2% decrease in refinance requests.

Refinances continued to account for 43% of total applications, MBA reported, while the ARM share edged up from the prior week to nearly 31%.