|A decline in mortgage applications may only be temporary as rates moved lower.
Freddie Mac reported the average 30-year fixed-rate mortgage at 6.20% in its Primary Mortgage Market Survey for the week ended Nov. 6. The 30-year tumbled 26 basis points from seven days earlier and was 4 BPS lower than one year earlier.
The 15-year fixed-rate mortgage averaged 5.88%, sinking 31 BPS from the previous week.
The 10-year Treasury yield, which fixed-mortgage rates move closely with, was 3.72% early today, falling from 3.91% one week earlier.
Freddie’s chief economist, Frank Nothaft, explained that weaker employment and falling consumer spending pushed mortgage rates lower.
“The economy shrank by 0.3 percent in the third quarter, led by the first decline in consumer spending since the fourth quarter of 1991. In September alone, consumer spending fell by the most since June 2004,” Nothaft said. “More recently, job layoffs more than doubled in October compared to September on year-over-year basis.”
Bankrate.com reported that 46% of the mortgage bankers, brokers and other “experts” it surveyed for the week Oct. 30 to Nov. 3 projected mortgage rates will rise at least 3 BPS during the next 35 to 45 days. Rates are heading lower, according to 38% of the panelists, while the rest forecast no change.
The five-year Treasury-indexed adjustable-rate mortgage averaged 6.19% this week, Freddie said. The five-year fell from 6.36% the prior week.
The one-year Treasury-indexed ARM averaged 5.25%, down from 5.38%.
The underlying one-year ARM index, the yield on the one-year Treasury, was 1.22% yesterday, dropping from 1.36% one week earlier.
Another ARM index, the six-month London Interbank Offered Rate, was 2.97% for the week ended Nov. 5, Bankrate.com reported. The previous week, LIBOR was 3.48%.
ARMs made up 3% of applications tracked by the Mortgage Bankers Association for the week ended Oct. 31, up from 2% the previous week. The slight improvement reflected the prior week’s widening of the spread between the one-year ARM yield and the average 30-year fixed rate.
MBA reported overall applications were down 20% during the past seven days on a seasonally adjusted basis, leaving the Market Composite Index at 379.9.
The drop was fueled by a 28% decrease in the Refinance Index, MBA said. The share of applications for refinances was 43%, falling from 47% a week prior.
Purchase activity was down 14% and government applications fell 13%.
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