Mortgage Daily

Published On: February 21, 2008
ARMs Attractive as Fixed Rates SoarAverage 30-year 6.04%

February 21, 2008

By SAM GARCIA

Fixed rates soared and applications tumbled. But the share of adjustable-rate applications was pushed higher.

In its survey of 125 thrifts, commercial banks and mortgage lending companies for the week ending Feb. 21, Freddie Mac reported the average 30-year fixed-rate mortgage at 6.04%, climbing from 5.72% the prior week. A year earlier, the 30-year averaged 6.22%.

The 15-year fixed-rate average climbed even more, up 39 basis points from the prior week to 5.64%, the survey said.

The 10-year Treasury, which often moves in tandem with fixed mortgage rates, yielded 3.77% today according to CNNMoney, about 1 BPS below its level seven days earlier.

Nearly half of the panelist surveyed by Bankrate.com for the week Feb. 21 to Feb. 27 projected rates will fall, while nearly another half forecasts a rise.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.37%, about 18 BPS worse than the prior week, Freddie said.

The 1-year Treasury-indexed ARM average was 4.98%, falling 2 BPS from a week previous. The 1-year Treasury itself yielded 2.16% Wednesday, jumping from 2.03% a week earlier, according to U.S. Treasury Department data.

The 6-month London Interbank Offered Rate, or LIBOR, yielded 2.98% Wednesday, just 2 BPS higher than a week earlier, according to Bankrate.com.

ARMs accounted for 13% of applications tracked by the Mortgage Bankers Association for the week ending Feb. 15, climbing from 10% a week earlier. Freddie’s Chief Economist Frank Nothaft said he expects ARMs will continue to comprise a growing share of activity as the spreads between fixed rates and ARMs continue to widen.

Mortgage applications sank 23% during the latest week, according to MBA’s survey. A 28% decline in refinance activity fueled the overall drop, though purchase applications were down 12%.

 

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: mtgsam@aol.com

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