|Applications waned as long-term rates stepped up to the highest level since May and the one-year ARM continued toward a three-year high.
The average 30-year fixed-rate mortgage was 5.77%, an increase of four basis points from last week, according to Freddie Mac’s latest Primary Mortgage Market Survey.
The average for the 15-year went up only two BPS to 5.34% this week, Freddie said.
The 10-year Treasury yield, followed closely by mortgage rate watchers, was 4.20% late Tuesday, down 5 BPS for the day, while the price was up 0.44 to 99.38.
A year ago, the averages for the 30-year and 15-year were respectively 31 PBS and 15 BPS higher.
Two-fifths of the mortgage “experts” Bankrate.com surveyed this week predicted that rates will rise over the next 35 to 45 days, and an equal number said they’d stay about the same, while only 20% saw a chance for a downturn.
Freddie’s and MBAs latest forecasts released earlier this month show the 30-year average at 6.0% during the first half of 2006. Secondary lender Fannie Mae, however, does not see it reaching that level at all next year, according to its July 19 forecast.
The average for the 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly edged up only 1 BPS from last week to 5.27%.
The 1-year Treasury-indexed ARM increased four BPS from a week ago to 4.46% — the highest level since the week ending July 18, 2002. The 1-year T-bill, an index used to price roughly half of all ARMs, was 3.76% on Tuesday — up 11 BPS from a week earlier.
“Currently, we are experiencing a rather flat yield curve,” commented Freddie chief economist Frank Nothaft in the announcement. “As a result, ARMs mortgages will probably become less popular because the uncertainty of future monthly payments may outweigh the savings realized in the initial rate period.“
The spread between the 30-year and the 1-year ARM has narrowed to 1.31% from 1.91% at this time last year, when the ARM share of applications was reported at above one-third. The share was 29% during the week ending July 22, according to the Mortgage Bankers Association’s latest applications survey, edging up from the prior week.
Originators completed fewer 1003s, however, as overall application volume decreased 5.8% from the previous week, MBA reported. The slowdown was led by an 11% downturn in refinance requests, as purchase money application activity was almost unchanged from the prior week.
Accordingly, the refinance share of mortgage activity reportedly fell to 43% from 46% in the previous week.
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com. E-mail: [email protected]