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Rates Worse But New Activity Better


New mortgage activity was higher this week despite that mortgage rates jumped. But a decline in the stock market today is likely to bring mortgage rates back down.

The benchmark 30-year fixed-rate mortgage was 5.05% in Freddie Mac’s mortgage survey of 125 thrifts, credit unions, commercial banks and mortgage banks for the week ended Feb. 25. The 30-year climbed from 4.93% a week earlier but was just under the 5.07% reported for a year earlier. Freddie’s regulator, the Federal Housing Finance Agency, reported today that the 30-year increased to 5.10% in January from 5.05% in December.

The 30-year conventional rate was 4.875% in the Mortgage Market Index for the week ended yesterday, unchanged from the previous report. The 30-year jumbo rate was also unmoved at 6.000%. The index reflected 135,397 total pricing inquiries for the latest week.

In its February housing forecast, Fannie Mae predicted that the 30-year would average 5.10% in the first quarter and steadily rise to 5.62% by the fourth quarter.

The average 15-year fixed-rated mortgage was 4.40% in Freddie’s report, climbing 7 basis points from seven days prior. The conventional 15-year stayed at 4.250% in the Mortgage Market Index report.

The 10-year yield, an indication of where mortgage rates are headed, was 3.651% during trading today as the Dow Jones Industrial Average sank more than 150 points, reported. The 10-year yield closed at 3.79% a week ago, based on data from the U.S. Department of the Treasury. The roughly 14 basis point decline suggests mortgage rates might be lower in next week’s reports.

Just 10% of the panelists surveyed by for the week Feb. 25 to March 3 predicted rates would decline at least 3 BPS over the next 35 to 45 days, while the rest were evenly split over whether rates would rise or stay put.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.16% in Freddie’s survey, 4 BPS worse than the previous week.

But at 4.15%, the one-year Treasury-indexed ARM averaged 8 BPS less than in Freddie’s prior survey. The one-year was 66 BPS better than the same week during 2009. Fannie projects that the one-year will average 4.37% during the first quarter and climb to 4.82% by the end of the year.

The yield on the one-year Treasury bill, which is used as the index on the one-year ARM, closed yesterday at 0.34%, 0.01% lower than a week earlier. The yield on another ARM index, the six month London Interbank Offered Rate, closed yesterday 0.39%. LIBOR, which is widely used on subprime ARMs, was unchanged for the second week.

ARM share was 4.7% in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Feb. 19. MBA reported ARM share at 4.4% the previous week. Fannie predicts that the ARM share of applications will climb to 8% this quarter from 5% in the fourth quarter and keep climbing to 11% by the final quarter of this year.

Loan activity climbed 10% this week, with the Mortgage Market Index rising to 34 inquiries-per-user from 31 the previous week. The index reflects pricing inquiries by customers of Mortech Inc.

Last week, overall applications were down 9% on a seasonally adjusted basis in MBA’s report. Purchases were down 7% and refinances were down 9%.

The average U.S. loan amount fell to $205,271 from $207,754 in the previous report. Washington, D.C.’s,’ $283,856 average loan amount was the highest in the nation followed by Alaska’s $283,205 and Hawaii’s $275,277. The lowest average loan amount was West Virginia’s $151,910.

Refinances accounted for 44% of activity in the latest report, easing from 45%. Rate-term refinances represented 29%, and cashouts made up 14%.

In MBA’s survey, which reflects week-old activity, refinance share eased to 68% from 69%.

Refinances will account for 63% of U.S. originations during the first quarter, according to Fannie. But the share is expected to tumble to 36% by the final quarter of 2010.

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