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Rates Improve, Apps Worsen

Rates Improve, Apps Worsen

Average 30-year fixed rate 6.52%

August 23, 2007


photo of Coco Salazar
As rates improved this week, mortgage application volume fell — possibly reflecting a withdrawal of applicants previously caught in the pipelines of some failed originators.

Sinking 10 basis points from last week, the 30-year fixed-rate mortgage average came in at 6.52%, Freddie Mac’s latest Primary Mortgage Market Survey showed. At this time last year, the average was at 6.48%.

The 15-year averaged 6.18%, sliding 12 BPS from a week ago.

The 10-year Treasury note yielded 4.63% near midday, 3 BPS worse than a week earlier.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage average slipped only 1 BPS from last week to 6.34%.

At 5.60%, the 1-year Treasury-indexed ARM fell 7 BPS from a week ago, Freddie said. The 1-year Treasury yield, however, plunged 60 BPS from a week earlier to 4.07% Tuesday, Federal Reserve data showed.

ARM share fell to 19% from 21% the prior week, the Mortgage Bankers Association announced on Wednesday.

Interest rates on conforming long-term fixed-rate mortgages and 1-year ARMs trended down “as a result of yields on Treasury securities coming down, and the Fed’s decision to cut the discount rate by half a percent to 5.75 percent last Friday,” Freddie Chief Economist Frank Nothaft explained in an announcement.

Mortgage rates are likely to keep head down over the next 35 to 45 days, according to 69 percent of the panelists surveyed by this week. The remaining percentage saw rates staying relatively unchanged.

Home loan application volume decreased by nearly 6% during the week ending Aug. 17, reflecting a 6% downturn in refinance requests and a 5% decrease in purchase money demand, MBA reported.

MBA noted that the current turmoil in the mortgage market may be the cause for week-to-week changes in purchase money application activity as sudden exits from originators may lead borrowers caught in the shutdown to reapply elsewhere and push up purchase loan requests.

“The drop in applications we see here may be an indication that those borrowers have now been taken care of,” MBA said.

The trade group noted refinances represented 40 percent of total applications during the latest reported period.

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