|Rates Continue Steady March Uphill, Freddie Says
Sharp uptick reported for second week in a row
July 11, 2003
By ANNE LINEBERRY
|Long-term interest rates shot upward, marking their second week of steep increases, Freddie Mac reported.
The average 30-year fixed rate climbed to 5.52 percent this week, up 12 basis points from last week’s average 5.40 percent, according to Freddie’s Primary Mortgage Market Survey. This uptick marks the second week in a row rates have jumped up more than 10 basis points in a week; prior to last week’s average of 5.40 percent, rates were 16 basis points lower, at 5.24 percent, Freddie said.
The 15-year rate also leapt 10 basis points to average 4.85 percent for the week, the survey said. Both fixed rates carried an average 0.6 points. The 15-year rate has been climbing continuously for the last four weeks, and the 30-year has been headed in the same direction steadily for the last three weeks, Freddie said. According to the survey, both long-term fixed rates are still averaging at least a full percentage point lower than this time last year.
Frank Nothaft, Freddie Mac’s chief economist, predicted rates would hover at these low levels throughout 2003.
“…the average rate [for the year] on 30-year, fixed-rate mortgages should be about 5.3%, maintaining a 1.9 percentage point spread over 10-year treasury rates,” he said.
Nothaft noted that the high unemployment rate would rein in rising interest rates, keeping them closer to present levels.
In general, Freddie economists don’t see rates rising above six percent in 2003.
At Bankrate.com, industry panelists see rates continuing to rise. Forty-six percent believe rates will go up in the short term. Thirty-one percent forecasted no change and 23 percent predict rates will go back down.
In calling for rates to go up, Bankrate.com’s financial analyst Greg McBride was quoted on the site, saying, “The trend toward higher rates should slow in the next couple weeks, but will continue as the economy strengthens. But any disappointing earnings or economic data, as well as any jawboning by Fed governors, could lead to a pullback in rates.”
The Market Composite Index, released by the Mortgage Bankers Association of America (MBA), showed a dropoff in mortgage loan applications for the week ended July 4.
According to the Weekly Mortgage Applications Survey, the index fell to 1346.3 seasonally-adjusted, compared to 1635.5 the prior week.
The survey reported a drop in all categorized indices; purchase, conventional, government and the refinance index, which fell from 8599.1 to 6768.3 for the week.
Jay Brinkmann, MBA’s vice president of research and economics, put the drop in refinance applications into perspective.
“The number of refinance applications fell back to the levels we saw at the beginning of May. So while there was a decline, it was a decline from unbelievably high levels to merely extraordinarily high levels,” he said.
Refinancings also fell as a percentage of total applications, comprising 72.1 percent, down from 75.6 percent the prior week, the survey said.
The 10-year Treasury yield closed at 3.66 percent Thursday, down one basis point from Wedesday’s 3.67 percent close and up one basis point from last week’s 3.66 percent finish.
According to Freddie, one-year Treasury-indexed adjustable-rate mortgages averaged 3.55 percent for the week, up six basis points over last week, with 0.7 points.
Anne Lineberry is MortgageDaily.com‘s editor. She previously worked as an online editor/producer for DallasNews.com and on the Metropolitan desk for the print edition of The Dallas Morning News. Email Anne at AnneLineberry@MortgageDaily.com
7 Refinance Strategies
Refinance to a lower interest rate: If interest rates have dropped since you took out your original mortgage, refinancing to a lower rate can help you save money on your monthly payments and reduce the overall cost of your loan. Refinance to a shorter loan term:...