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Rising Rates May Ease

Rates

Mortgage rates increased but may fall as the stock market deteriorates to levels not seen in more than a decade.

Climbing 8 basis points from last week, the average 30-year fixed-rate mortgage was 5.15% in Freddie Mac’s Primary Mortgage Market Survey for the week ending March 5. A year earlier, Freddie reported the 30-year at 6.03%.

But the 30-year fell 42 BPS during January, a report last week from the Federal Housing Finance Agency said.

Up a more moderate 4 BPS from last week, Freddie reported that the average 15-year fixed-rate mortgage was 4.72%. FHFA’s report indicated the 15-year was down 32 BPS in January.

Freddie’s chief economist, Frank Nothaft, noted in the survey that rates were impacted by record jobless claims and spiraling economic activity.

As the Dow Jones Industrial Average sat at its lowest level in more than a decade — 6663.42 in late morning trading — the 10-year Treasury yield fell to 2.852%, down from around 2.995% during trading seven days ago and suggesting mortgage rates will decline.

A plurality of the 100 panelists surveyed by Bankrate.com for the week March 5 to March 11 expected mortgage rates to remain within 2 BPS of their current levels during the next 35 to 45 days. The rest, 62, were evenly split over whether rates will rise or fall.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.08%, up just 2 BPS from the previous week, Freddie’s survey said.

The average one-year Treasury-indexed ARM was 0.05% higher at 4.86% this week, according to Freddie. The index on the one-year ARM, the yield on the one-year Treasury, closed yesterday at 0.71%, lower than 0.75% seven days earlier, according to U.S. Treasury Department data.

The six-month London Interbank Offered Rate was 1.81% yesterday, Bankrate.com reported. LIBOR, which is used as an ARM index for many subprime mortgages, was 1.75% a week prior.

The Mortgage Bankers Association said ARMs accounted for 2% of applications tracked in its Weekly Mortgage Applications Survey for the week ending Feb. 27. ARM share barely nudged up from the previous week.

MBA said overall applications were down 13% on a seasonally adjusted basis from the prior week, leaving the Market Composite Index at 649.7. Compared to a year earlier, 1003 activity was down 7%.

Refinance activity fell 15%, pushing the refinance share down to 67% from the prior week’s 70%. Purchase applications were down 6% and government business was off 4%.

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